Endowment Effects in Proposal Rights Contests

Abstract

When parties negotiate over surplus, incumbents, or agenda-setters, tend to spend more resources than challengers to keep their power in making a proposal. This is often attributed to the fact that incumbents usually have better access to resources. We experimentally investigate whether incumbents spend more resources even when they have no advantage. Specifically, we consider a twostage game where in the first stage, players compete to be recognized as a proposer, and in the second stage, they play an ultimatum bargaining game. Our treatment concerns whether one of the subjects is endowed with proposal right (without any material advantage) in the beginning of the game. We find that subjects who were framed to be incumbents spent significantly more resources to keep the proposal right than others. This suggests that even without any resource advantage, the parties who have the power would incur higher costs to keep it, and thus, the allocation of power is likely to persist. Our finding is new in the sense that the endowment effect does not concern “property right†as in previous studies but “proposal right.â€