Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions

Aniol Llorente-Saguer, Roman Sheremeta and Nora Szech

MPRA Paper from University Library of Munich, Germany

Abstract: A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the “discouragement effect.” Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer’s revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning.

Keywords: all-pay auction; rent-seeking; bid-caps; tie-breaks; contest design (search for similar items in EconPapers)
JEL-codes: C72 C91 D72 (search for similar items in EconPapers)
Date: 2016-05-08
New Economics Papers: this item is included in nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/71202/1/MPRA_paper_71202.pdf original version (application/pdf)

Related works:
Journal Article: Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions (2023)
Working Paper: Designing Contests Between Heterogeneous Contestants: An Experimental Studie of Tie-Breaks and Bid-Caps in All-Pay Auctions (2020)
Working Paper: Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions (2016)
Working Paper: Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions (2016)
Working Paper: Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions (2016)
Working Paper: Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions (2016)
Working Paper: Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions (2016)
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