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

No 796, Working Papers from Queen Mary University of London, School of Economics and Finance

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 favouring weaker contestants through bid-caps and favourable 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: 2016-05-20
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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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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