Explaining Excess Entry in Winner-Take-All Markets

• 成果类型: Article
• 署名作者: Laferriere, Vincent; Staubli, David; Thoni, Christian
• 署名单位: University of Lausanne
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4397
• 发表日期: 2023
• 页码: 1050-1069
• 关键词: winner-take-all market; Market entry game; Excess entry; cumulative prospect theory; probability weighting; experiment

摘要

We report experimental data from standard market entry games and winner-take-all games. At odds with traditional decision-making models with risk aversion, the winner-take-all condition results in substantially more entry than the expected-payoff-equivalent market entry game. We explore three candidate explanations for excess entry: blind spot, illusion of control, and joy of winning, none of which receive empirical support. We provide a novel theoretical explanation for excess entry based on cumulative prospect theory and test it empirically. Our results suggest that excess entry into highly competitive environments is not caused by a genuine preference for competing, but is instead driven by probability weighting. Market entrants overweight the small probabilities associated with the high payoff outcomes in winner-take-all-markets, while they underweight probable failures.