Overbidding and Heterogeneous Behavior in Contest Experiments: A Comment on the Endowment Effect

Subhasish M. Chowdhury, Peter G. Moffatt

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Abstract

We revisit the meta-analysis of Sheremeta (2013) on overbidding in contest experiments and focus on the effect of endowment on overbidding. Whereas Sheremeta (2013) assumes, and finds evidence of, an increasing linear relationship between endowment and overbidding in his meta-analysis, Quantal Response Equilibrium (QRE) predicts an increasing concave relationship, and Baik et al. (2016) find an inverted-U shaped relationship in their analysis of a single experiment. We use the same data as in Sheremeta (2013), but employ a different econometric model which leads to support for both QRE and the inverted-U shaped relationship. Following Baik et al. (2016) we posit that the inverted-U relationship may be interpreted in terms of a wealth effect.
Original languageEnglish
Pages (from-to)572-576
Number of pages5
JournalJournal of Economic Surveys
Volume31
Issue number2
Early online date23 Mar 2016
DOIs
Publication statusPublished - Apr 2017

Keywords

  • Experiments
  • Contests
  • Overbidding
  • Endowment
  • Meta-analysis

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