New Hampshire Effect: Behavior in Sequential and Simultaneous Multi-Battle Contests
43 Pages Posted: 24 Mar 2018
Date Written: December 7, 2017
Sequential multi-battle contests are predicted to induce lower expenditure than simultaneous contests. This prediction is a result of a “New Hampshire Effect” – a strategic advantage created by the winner of the first battle. Although our laboratory study provides evidence for the New Hampshire Effect, we find that sequential contests generate significantly higher (not lower) expenditure than simultaneous contests. This is mainly because in sequential contests, there is significant over-expenditure in all battles. We suggest sunk cost fallacy and utility of winning as two complementary explanations for this behavior and provide supporting evidence.
Keywords: election, sequential contests, simultaneous contests, experiments
JEL Classification: C72, C73, C91, D72
Suggested Citation: Suggested Citation