Chowdhury, S.M., Jeon, J.Y. and Ramalingam, A. (2018) PROPERTY RIGHTS AND LOSS AVERSION IN CONTESTS. Economic Inquiry, 56 (3). pp. 1492-1511. ISSN 0095-2583
Abstract
We analyze the effects of property rights and the resulting loss aversion on contest outcomes. We study three situations: in “gain” two players start with no prize and make sunk bids to win a prize; in “loss” both the players start with prizes and whoever loses the contest loses their prize; and in “mixed” only one player starts with a prize that stays with him if he wins, but is transferred to the rival otherwise. Since the differences among the treatments arise only from framing, the expected utility and the standard loss aversion models predict no difference in bids across treatments. We introduce a loss aversion model in which the property rights are made salient, and as a result the reference point varies across treatments. This model predicts average bids in descending order in the loss, the mixed, and the gain treatment; and higher bids by the player with property rights in the mixed treatment. The results from a laboratory experiment broadly support these predictions. There is no significant difference in bids in the loss (gain) treatment and bids by property rights holder (nonholder) in the mixed treatment. A model incorporating both loss aversion and social preferences explains this result. (JEL C91, C72, D23, D74).
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2017 Western Economic Association International. This is an author-produced version of a paper subsequently published in Economic Inquiry. Uploaded in accordance with the publisher's self-archiving policy. |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 31 May 2023 14:13 |
Last Modified: | 01 Jun 2023 14:36 |
Status: | Published |
Publisher: | Wiley |
Refereed: | Yes |
Identification Number: | 10.1111/ecin.12505 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:199696 |