Christian Thöni

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. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Funding: This work was supported by the Schweizerischer Nationalfonds zur Förderung der Wissenschaftlichen Forschung [Grants 100018_182185 and 26022621] and the Dr. h.c. Emil Zaugg-Fonds [Grant B11162135]. Supplemental Material: The data files and e-companion are available at https://doi.org/10.1287/mnsc.2022.4397 .