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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 ()
Additional contact information
Nora Szech: Karlsruhe Institute of Technology, WZB, and CESifo Institute

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 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
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 (5) Track citations by RSS feed

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https://www.qmul.ac.uk/sef/media/econ/research/wor ... 2016/items/wp796.pdf (application/pdf)

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