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An experimental investigation of overdissipation in the all pay auction

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  • Lugovskyy, Volodymyr
  • Puzzello, Daniela
  • Tucker, Steven

Abstract

Pervasive overbidding represents a well-documented feature of all-pay auctions. Aggregate bids exceed Nash predictions in laboratory experiments, and individuals often submit bids that guarantee negative profits. This paper examines three factors that may reduce pervasive overbidding: (a) repetition (experience), (b) reputation (strangers vs. partners) and (c) active participation. We find that aggregate over-dissipation diminishes but is not eliminated with repetition, and that repetition, in conjunction with active participation generates bids consistent with the static Nash predictions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8604.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:8604

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Cited by:
  1. Hyndman, Kyle & Ozbay, Erkut Y. & Sujarittanonta, Pacharasut, 2012. "Rent seeking with regretful agents: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 866-878.
  2. Sheremeta, Roman, 2013. "Overbidding and Heterogeneous Behavior in Contest Experiments," MPRA Paper 44124, University Library of Munich, Germany.
  3. Hironori Otsubo, 2013. "Do campaign spending limits diminish competition? An experiment," Economics Bulletin, AccessEcon, vol. 33(3), pages 2223-2234.
  4. Shakun D. Mago & Anya C. Savikhin & Roman M. Sheremeta, 2012. "Facing Your Opponents: Social identification and information feedback in contests," Working Papers 12-15, Chapman University, Economic Science Institute.
  5. Chowdhury, Subhasish & Kovenock, Dan & Sheremeta, Roman, 2011. "An Experimental Investigation of Colonel Blotto Games," MPRA Paper 46810, University Library of Munich, Germany.
  6. Curtis R. Price & Roman M. Sheremeta, 2012. "Endowment Origin, Demographic Effects and Individual Preferences in Contests," Working Papers 12-07, Chapman University, Economic Science Institute.
  7. Shakun D. Mago & Roman M. Sheremeta, 2012. "Multi-Battle Contests: An Experimental Study," Working Papers 12-06, Chapman University, Economic Science Institute.

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