Exclusion in the all-pay auction: An experimental investigation

Dietmar Fehr and Julia Schmid

No 2011-009, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: Contest or auction designers who want to maximize the overall revenue are frequently concerned with a trade-off between contest homogeneity and inclusion of contestants with high valuations. In our experimental study, we find that it is not profitable to exclude the most able contestant in favor of greater homogeneity among the remaining contestants, even if the theoretical exclusion principle predicts otherwise. This is because the strongest contestants considerably overexert. A possible explanation is that these contestants are afraid they will regret a low but risky bid if they lose and thus prefer a strategy which gives them a low but secure pay-off.

Keywords: experiments; contests; all-pay auction; heterogeneity; regret aversion (search for similar items in EconPapers)
JEL-codes: C72 C92 D84 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2011-009

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