Excess Entry in an Experimental Winner-Take-All Market

Urs Fischbacher and Christian Th�ni
Authors registered in the RePEc Author Service: Christian Thöni

No 86, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

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 the functioning of such markets with the help of experiments 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. We discuss several concepts that might explain the observed excess entry.

Keywords: Winner-take-all market; Excess entry; Experiment, Market entry (search for similar items in EconPapers)
JEL-codes: C92 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Excess entry in an experimental winner-take-all market (2008)
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