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Exclusion in the All-Pay Auction: An Experimental Investigation

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  • Dietmar Fehr
  • Julia Schmid
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    Abstract

    Contest or auction designers who want to maximize the overall revenue are frequently con- cerned 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 con- siderably 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.

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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2011-009.pdf
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    Bibliographic Info

    Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2011-009.

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    Length: 32 pages
    Date of creation: Feb 2011
    Date of revision:
    Handle: RePEc:hum:wpaper:sfb649dp2011-009

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    Related research

    Keywords: experiments; contests; all-pay auction; heterogeneity; regret aversion;

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    1. Emel Filiz-Ozbay & Erkut Y. Ozbay, 2007. "Auctions with Anticipated Regret: Theory and Experiment," American Economic Review, American Economic Association, vol. 97(4), pages 1407-1418, September.
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