Who pays to win again? The joy of winning in contest experiments

Herbst, Luisa

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Who pays to win again? The joy of winning in contest experiments

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Herbst, Luisa
Public Economics, MPI for Tax Law and Public Finance, Max Planck Society;

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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2766934
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Herbst, L. (2016). Who pays to win again? The joy of winning in contest experiments. Working Paper of the Max Planck Institute for Tax Law and Public Finance, No. 2016-6.

Cite as: https://hdl.handle.net/11858/00-001M-0000-002C-466B-8

Abstract

In contest experiments, overbidding is a widely observed phenomenon. One common explanation for overbidding is that winning in itself yields utility, termed the joy of winning. However, the joy of winning is difficult to observe and to quantify. This paper develops a novel, incentivized way to measure the individual-specific joy of winning as well as the frustration of losing in a Tullock lottery contest. We find that the willingness to pay for a restart of the contest differs between winners and losers. Compared to a theoretical benchmark, winners are more satisfied and overbid for restart of the contest, while losers are less satisfied and underbid. Further, effort levels are higher in the second contest, which can be explained by selection of high effort types with a high joy of winning into the restarted contest.