Exclusion in the All-Pay Auction: An Experimental Investigation

38 Pages Posted: 22 Apr 2011

See all articles by Dietmar Fehr

Dietmar Fehr

Heidelberg University - Alfred Weber Institute for Economics

Julia Schmid

affiliation not provided to SSRN

Date Written: August 19, 2010

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 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

Fehr, Dietmar and Schmid, Julia, Exclusion in the All-Pay Auction: An Experimental Investigation (August 19, 2010). Available at SSRN: https://ssrn.com/abstract=1815001 or http://dx.doi.org/10.2139/ssrn.1815001

Dietmar Fehr (Contact Author)

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

Julia Schmid

affiliation not provided to SSRN ( email )

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