Exclusion in All‐Pay Auctions: An Experimental Investigation

14 Pages Posted: 5 Jun 2018

See all articles by Dietmar Fehr

Dietmar Fehr

Heidelberg University - Alfred Weber Institute for Economics

Julia Schmid

German Institute for Economic Research (DIW Berlin)

Date Written: Summer 2018

Abstract

Contest designers and managers who wish to maximize the overall revenue of a contest 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 strongest bidder in order to promote greater homogeneity among the remaining bidders, even though the theoretical exclusion principle predicts otherwise. This is because the strongest bidders are willing to give up a substantial portion of their expected rent in order to minimize the chance of losing the contest.

Suggested Citation

Fehr, Dietmar and Schmid, Julia, Exclusion in All‐Pay Auctions: An Experimental Investigation (Summer 2018). Journal of Economics & Management Strategy, Vol. 27, Issue 2, pp. 326-339, 2018, Available at SSRN: https://ssrn.com/abstract=3189125 or http://dx.doi.org/10.1111/jems.12243

Dietmar Fehr (Contact Author)

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

Julia Schmid

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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