Exclusion in the All-Pay Auction: An Experimental Investigation

Fehr, Dietmar; Schmid, Julia

doi:10.2139/ssrn.1815001

Cited by 7 publications

(10 citation statements)

References 30 publications

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“…However, as before, there is significant overbidding, both in the benchmark symmetric game and the asymmetric game, with a substantial portion of the overbidding in the latter game being driven by the behavior of the stronger players. Fehr and Schmidt (2011) replicate these findings in an experiment designed to investigate the "exclusion principle" of Baye et al (1993). Finally, Deck and Sheremeta (2012) find support for a discouragement effect in dynamic all-pay auctions with asymmetric players, where theoretical benchmarks (Konrad and Kovenock, 2009) suggest that the discouragement effect might be even stronger than in simultaneous move games.…”

Section: Heterogeneous Playersmentioning

confidence: 76%

“…Their important finding carries over to symmetric all-pay auctions. Indeed, except for Potters et al (1998), the majority of studies using symmetric all-pay auctions with complete information also find that session averages reflect overbidding (Gneezy and Smorodinsky, 2006;Lugovskyy et al, 2010;Fehr and Schmidt, 2011;Klose and Sheremeta, 2012;Ernst and Thöni, 2013;Ong and Chen, 2013). While Potters et al find evidence of equilibrium play in their two-player all-pay auction experiment, their design imposed an exogenous cap on bids (15% above the prize value), which may have biased behavior toward lower, equilibrium bids.…”

Section: All-pay Auctionsmentioning

confidence: 98%

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A Survey of Experimental Research on Contests, All-Pay Auctions and Tournaments

2012

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Many economic, political and social environments can be described as contests in which agents exert costly efforts while competing over the distribution of a scarce resource. These environments have been studied using Tullock contests, all-pay auctions and rank-order tournaments. This survey provides a comprehensive review of experimental research on these three canonical contests. First, we review studies investigating the basic structure of contests, including the number of players and prizes, spillovers and externalities, heterogeneity, risk and incomplete information. Second, we discuss dynamic contests and multi-battle contests. Then we review studies examining sabotage, feedback, bias, collusion, alliances, group contests and gender, as well as field experiments. Finally, we discuss applications of contests and suggest directions for future research. IntroductionMany economic, political and social environments can be described as contests in which competing agents have the opportunity to expend scarce resources -such as effort, money, time, or troops -in order to affect the probabilities of winning prizes. Examples range from the competition for mates, college admission, patents, or promotions within firms, to the process of litigation or lobbying politicians, to elections, sports competitions, and violent global conflicts (Tullock, 1967;Krueger, 1974). As is obvious from this list, these environments have attracted considerable attention in applications in a wide range of fields, both in-and out-side of economics. They have also been studied extensively by economic theorists in what has become known as the field of contest theory (Konrad, 2009). Although this field continues to attract many young theorists, it has its roots in three models developed in the mid-seventies to early eighties: the Tullock (1980) model of rent-seeking, the Lazear and Rosen (1981) rank-order tournament model, and the all-pay auction (Hirshleifer and Riley, 1978;Nalebuff and Stiglitz, 1983;Dasgupta, 1986;Hillman and Riley, 1989). Despite the fact that the three models historically developed somewhat independently, they represent special cases of a general contest model that can be formulated in a unified framework.Despite an extensive and established theoretical literature, much less effort has been devoted to empirically investigate individual behavior in different contests and compare such behavior with theoretical predictions. The main reason is that it is not trivial to measure individual effort in the field since the researcher can only observe the performance of contestants, which is a function of effort, ability and luck (Ericsson and Charness, 1994). The majority of empirical studies use either firm level data (Prendergast, 1999) or sports data (Szymanski, 2003). Because it is typically difficult to measure the actual effort expended by players in the field, almost all of these studies focus solely on investigating whether the pattern of outcomes is consistent with the theoretical predictions.Controlled experimen...

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Section: Heterogeneous Playersmentioning

confidence: 76%

Section: All-pay Auctionsmentioning

confidence: 98%

A Survey of Experimental Research on Contests, All-Pay Auctions and Tournaments

2012

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“…1 See also Noussair and Silver [3] for all-pay auctions with private values and Barut et al [4] for multiple unit all-pay auctions. Fehr and Schmid [5] study exclusion of bidders in all-pay auctions.…”

Section: Open Accessmentioning

confidence: 99%

Bimodal Bidding in Experimental All-Pay Auctions

Ernst

Thöni

2013

Games

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We report results from experimental first-price, sealed-bid, all-pay auctions for a good with a common and known value. We observe bidding strategies in groups of two and three bidders and under two extreme information conditions. As predicted by the Nash equilibrium, subjects use mixed strategies. In contrast to the prediction under standard assumptions, bids are drawn from a bimodal distribution: very high and very low bids are much more frequent than intermediate bids. Standard risk preferences cannot account for our results. Bidding behavior is, however, consistent with the predictions of a model with reference dependent preferences as proposed by the prospect theory

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“…2 Both of these policies aim to reduce 1 Experimental studies found support for the discouragement effect in all-pay auctions (Davis and Reilly, 1998;Deck and Sheremeta, 2012;Fehr and Schmidt, 2015), lottery contests (Fonseca, 2009;Kimbrough et al, 2014), rank-order tournaments (Weigelt et al, 1989;Schotter and Weigelt, 1992), and real-effort tournaments (Cason et al, 2010;Gill and Prowse, 2012). 2 Kaplan and Wettstein (2006) argue that if caps are not rigid, the existence of a cap will not result in increased spending.…”

Section: Introductionmentioning

confidence: 99%

Designing Contests between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions

2016

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A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the "discouragement effect." Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer's revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning.JEL Classifications: C72, C91, D72

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Exclusion in the All-Pay Auction: An Experimental Investigation

Cited by 7 publications

References 30 publications

A Survey of Experimental Research on Contests, All-Pay Auctions and Tournaments

A Survey of Experimental Research on Contests, All-Pay Auctions and Tournaments

Bimodal Bidding in Experimental All-Pay Auctions

Designing Contests between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions

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