Estimating Preferences for Competition from Convex Budget Sets
Abstract/Contents
- Abstract
- The literature in experimental economics has linked the laboratory measurement of preferences for competition with labor market outcomes and educational choices, such as wages and career choices. If preferences for competition are an important determinant of behavior, it is crucial to develop an accurate approach to measure them. In this study, we test whether preferences for competition can be rationalized by a utility function and develop a framework for the joint treatment of preferences for competition and risk. Our design improves on previous work in that it generates a rich data set of individual-level choices, accounts structurally for the relation between risk and competition preferences, and controls carefully for overconfidence. This allows us to test whether choices to enter tournaments are consistent with GARP and to estimate with a high degree of certainty the extent to which these choices are explained by a preference for competition and not by other confounding factors present in the environment. Our findings provide strong evidence for a preference for competition at the individual level that largely satisfies GARP, and that is conceptualized by two terms in the utility function of income obtained in a competitive environment. The first term assumes that preferences for competition affect utility directly through payoffs and the second term allows preferences for competition to influence utility through risk preferences. We discuss the economic implications of both interpretations of preferences for competition and discuss their relation with risk preferences.
Description
| Type of resource | text |
|---|---|
| Date created | August 12, 2021 |
Creators/Contributors
| Author | Lozano, Lina |
|---|---|
| Author | Reuben, Ernesto |
| Organizer of meeting | Exley, Christine |
| Organizer of meeting | Marquina, Alejandro Martínez |
| Organizer of meeting | Niederle, Muriel |
| Organizer of meeting | Roth, Alvin |
| Organizer of meeting | Vesterlund, Lise |
Subjects
| Subject | preference elicitation |
|---|---|
| Subject | competition |
| Subject | risk |
| Subject | consistency |
| Subject | GARP |
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
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- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Lozano, L. and Reuben, E. (2022). Estimating Preferences for Competition from Convex Budget Sets. Stanford Digital Repository. Available at https://purl.stanford.edu/bg279ym7605
Collection
SITE Conference 2021
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- siteworkshop@stanford.edu
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