[Econmaster2012] Research Seminar in Economics-Announcement

[Johannes Pfeifer]

Dear All,

 

we are happy to announce the following  Research Seminar in Economics to
take place on Tuesday, October 30th  at  18:00 - 19:30 in room E03, ground
floor, Mohlstraße 36.

 

Presenter:  Henrik Orzen– University of Mannheim

 

Title:  "Strategic and natural risk in experimental market entry games"

 

Abstract:

 

We report the results of experiments on market entry. Those who enter make
investment decisions to capture value. Payoffs depend on both strategic risk
(i.e. the investments of other entrants) and natural risk (i.e. luck).
Absent natural risk, participants endogenously sort themselves into entrants
and non-entrants and both types earn the same expected payoff, as predicted.
Adding natural risk fundamentally changes these conclusions: Here we observe
excessive entry and excessive investment so that entrants earn
systematically less than the outside option. These payoff differences
persist even after many repetitions of the task. When the outside option
becomes risky, entry rates increase even further but now many entrants
invest little. All entrants still earn significantly less than the outside
option. Finally, we examine an environment in which entry is compulsory but
where players can choose between a high- and a low-stakes market. Here, we
observe under-entry and under-investment in the high-stakes market, while
the opposite is true in the low-stakes setting. As a result, returns to
entrepreneurship are positive under high stakes and negative under low
stakes. Once again, payoffs between the two markets do not equalize. We
discuss possible explanations for our various findings.

 

Regards,

 

Prof. Dr. Johannes Pfeifer

 

--

Johannes Pfeifer

Department of Economics

University of Tuebingen

Mohlstrasse 36

72074 Tuebingen

Germany

Phone: +49 7071 2974137

 

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