Behavior in All-Pay Auctions with Ties

36 Pages Posted: 31 Oct 2015

See all articles by Alan Gelder

Alan Gelder

Chapman University - Economic Science Institute

Dan Kovenock

Chapman University - Economic Science Institute; CESifo (Center for Economic Studies and Ifo Institute)

Roman M. Sheremeta

Case Western Reserve University

Date Written: October 29, 2015

Abstract

Despite the wide occurrence of ties in a variety of contest settings, the strategic interaction that arises when ties are treated as viable outcomes has received little attention. Building on recent theoretical work, we experimentally examine an extension of the canonical two-player all-pay auction in which a tie occurs unless one player’s bid exceeds the other’s by some critical threshold. In the event of a tie, each player receives an identical fraction of the prize. For the case where players receive one-half of the prize when they tie, we find that players’ expenditures are non-monotonic in the threshold required for victory. Moreover, for certain positive thresholds, expenditures may even be higher than under the standard all-pay auction. We also find that decreasing the fraction of the prize players receive for tying may either increase or decrease total expenditures. In accordance with theory, the effect depends upon the threshold.

Keywords: All-pay auction, contest, tie, draw, bid differential, experiment

JEL Classification: C72, C92, D44, D72, D74

Suggested Citation

Gelder, Alan and Kovenock, Daniel and Sheremeta, Roman M., Behavior in All-Pay Auctions with Ties (October 29, 2015). Available at SSRN: https://ssrn.com/abstract=2683568 or http://dx.doi.org/10.2139/ssrn.2683568

Alan Gelder

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States

Daniel Kovenock

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Roman M. Sheremeta (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

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