Exclusion in the All-Pay Auction: An Experimental Investigation
38 Pages Posted: 22 Apr 2011
Date Written: August 19, 2010
Contest or auction designers who want to maximize the overall revenue 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 contestant in favor of greater homogeneity among the remaining contestants, even if the theoretical exclusion principle predicts otherwise. This is because the strongest contestants considerably overexert. A possible explanation is that these contestants are afraid they will regret a low but risky bid if they lose and thus prefer a strategy which gives them a low but secure pay-off.
Keywords: experiments, contests, all-pay auction, heterogeneity, regret aversion
JEL Classification: C72, C92, D84
Suggested Citation: Suggested Citation