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Exclusion in the all-pay auction: An experimental investigation

Dietmar Fehr and Julia Schmid

No SP II 2017-202, Discussion Papers, Research Unit: Market Behavior from WZB Berlin Social Science Center

Abstract: Contest designers or managers who want to maximize the overall revenue of a contest (relative performance scheme) 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 bidder in favor of greater homogeneity among the remaining bidders, even if the theoretical exclusion principle predicts otherwise. This is because the strongest bidders are willing to give up a substantial part of their expected rent and prefer a strategy that ensures a lower but secure pay-off.

Keywords: all-pay auction; contests; heterogeneity; superstars; experiments (search for similar items in EconPapers)
JEL-codes: C72 C92 D84 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp, nep-gth and nep-hpe
Date: 2017
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Related works:
Working Paper: Exclusion in the all-pay auction: An experimental investigation (2014) Downloads
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