Exclusion in the all-pay auction: An experimental investigation

Dietmar Fehr and Julia Schmid

Discussion Papers, Research Unit: Market Behavior from WZB Berlin Social Science Center

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 bidders with high valuations. In our experimental study, we find that it is not profitable to exclude the most able bidder in favor of greater homogeneity among the remaining bidders, even if the theoretical exclusion principle predicts otherwise. This is because the strongest bidders considerably overexert. A possible explanation is that these bidders are afraid they will regret a low but risky bid if they lose and thus prefer a strategy which gives them a lower 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: 2014
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 (38)

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Related works:
Journal Article: Exclusion in all‐pay auctions: An experimental investigation (2018)
Working Paper: Exclusion in the all-pay auction: An experimental investigation (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbmbh:spii2014206

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