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Exclusion in all‐pay auctions: An experimental investigation

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  • Dietmar Fehr
  • Julia Schmid

Abstract

Contest designers and managers who wish to maximize the overall revenue of a contest are frequently concerned 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 strongest bidder in order to promote greater homogeneity among the remaining bidders, even though the theoretical exclusion principle predicts otherwise. This is because the strongest bidders are willing to give up a substantial portion of their expected rent in order to minimize the chance of losing the contest.

Suggested Citation

  • Dietmar Fehr & Julia Schmid, 2018. "Exclusion in all‐pay auctions: An experimental investigation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(2), pages 326-339, June.
  • Handle: RePEc:bla:jemstr:v:27:y:2018:i:2:p:326-339
    DOI: 10.1111/jems.12243
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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