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An experimental investigation of overdissipation in the all pay auction

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Author Info
Lugovskyy, Volodymyr
Puzzello, Daniela
Tucker, Steven

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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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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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Find related papers by JEL classification:
C9 - Mathematical and Quantitative Methods - - Design of Experiments
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  5. Henrik Orzen, 2005. "Fundraising through Competition: Evidence from the Lab," Discussion Papers 2005-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
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  6. Jan Potters & Casper G. de Vries & Frans van Winden, 1998. "An Experimental Examination of Rational Rent-Seeking," Tinbergen Institute Discussion Papers 98-068/1, Tinbergen Institute.
    Other versions:
  7. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 435-446, April. [Downloadable!] (restricted)
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  8. Davis, Douglas D & Reilly, Robert J, 1998. " Do Too Many Cooks Always Spoil the Stew? An Experimental Analysis of Rent-Seeking and the Role of a Strategic Buyer," Public Choice, Springer, vol. 95(1-2), pages 89-115, April. [Downloadable!] (restricted)
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  9. Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
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  11. Dougan, William R, 1991. "The Cost of Rent Seeking: Is GNP Negative?," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 660-64, June. [Downloadable!] (restricted)
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  13. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
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  15. Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-59, July.
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  16. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer, vol. 8(2), pages 291-305.
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  17. Jeffrey Carpenter & Jessica Holmes & PeterHans Matthews, 2008. "Charity auctions: a field experiment," Economic Journal, Royal Economic Society, vol. 118(525), pages 92-113, 01. [Downloadable!] (restricted)
  18. Anabela Botelho & Glenn W. Harrison & Lígia Pinto & Elisabet E. Rutstrom, 2005. "Testing static game theory with dynamic experiments: a case study of public goods," Working Papers 29, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Subhasish M. Chowdhury & Dan Kovenock J. & Roman M. Sheremeta, 2009. "An Experimental Investigation of Colonel Blotto Games," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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