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Bimodal Bidding in Experimental All-Pay Auctions

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  • Christiane Ernst

    ()

  • Christian Thöni

    ()

Abstract

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. However, bidding behavior is consistent with the predictions of a model with reference dependent preferences as proposed by the prospect theory.

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Bibliographic Info

Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2009 with number 2009-25.

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Length: 20 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:usg:dp2009:2009-25

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Keywords: All-pay Auction; Prospect Theory; Experiment;

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