Impulsive Behavior in Competition: Testing Theories of Overbidding in Rent-Seeking Contests

Abstract

Contests are commonly used in the workplace to motivate workers, determine promotion, and assign bonuses. Although contests can be very effective at eliciting high effort, they can also lead to inefficient effort expenditure (overbidding). Researchers have proposed various theories to explain overbidding in contents, including mistakes, systematic biases, the utility of winning, and relative payoff maximization. Using an eight-part experiment, we test and find significant support for the existing theories. Also, we discover new explanations based on cognitive ability and impulsive behavior. Out of all explanations examined, we find that impulsivity is the most important factor explaining overbidding in contests.

About the presenter’s visit

Roman Sheremeta will be visiting the School of Economics on 3 May 2019.  While here he will be using room 520A Colin Clark Building.  If you would like to meet with Roman Sheremeta or have lunch or dinner with him please contact Dr Marco Faravelli who will be his host while at The University of Queensland.  Dr Faravelli can be contacted on m.faravelli@uq.edu.au.