Contests and negotiation between hubristic players

Long, Iain W. ORCID: https://orcid.org/0000-0002-3607-4031 2019. Contests and negotiation between hubristic players. Cardiff Economics Working Papers, Cardiff: Cardiff University Business School. Available at: http://carbsecon.com/wp/E2019_17.pdf

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Abstract

Why do contests exist in settings where negotiation provides a costless alternative? I assess a new explanation: parties may be overconfident about their ability or optimistic about their chances of winning. For both parties in a contest, this hubris: (i) reduces the incentive to exit the contest; (ii) reduces effort; and (iii) increases expected payoffs. Whilst hubris leads to the contest being preferred to costless negotiation, the welfare loss is nonmonotonic in either behavioural bias.

Item Type:	Monograph (UNSPECIFIED)
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Additional Information:	This working paper is produced for discussion purpose only. These working papers are expected to be published in due course, in revised form, and should not be quoted or cited without the author’s written permission.
Publisher:	Cardiff University Business School
ISBN:	1749-6010
Date of Acceptance:	19 May 2021
Last Modified:	10 Nov 2022 10:46
URI:	https://orca.cardiff.ac.uk/id/eprint/148111

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