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Excess entry in an experimental winner-take-all market

Urs Fischbacher & Christian Thoeni

abstract “Winner-take-all” markets (i.e., markets in which the relative and not the absolute performance is decisive) have gained in importance. Such markets have a tendency to provoke inefficiently many entries. We investigate such markets in an experiment and show that there are even more inefficient entries than predicted by the Nash equilibrium. Moreover, this effect increases with group size. Quantal response equilibrium predicts the increase in group size but fails to predict the excess entry in the smaller group. We show that the excess entry is not caused by coordination failures. Furthermore, individual entry behavior is not significantly linked to risk preferences.
   
type journal paper
   
keywords Winner-take-all market; Excess entry; Experiment; Market entry
   
language English
kind of paper journal article
date of appearance 1-7-2008
journal Journal of Economic Behavior and Organization
publisher Elsevier (Amsterdam)
ISSN 0167-2681
ISSN (online) 1879-1751
DOI 10.1016/j.jebo.2006.05.018
volume of journal 67
number of issue 1
page(s) 150-163
review blind review
   
citation Fischbacher, U., & Thoeni, C. (2008). Excess entry in an experimental winner-take-all market. Journal of Economic Behavior and Organization, 67(1), 150-163, DOI:10.1016/j.jebo.2006.05.018.