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An experimental investigation of overdissipation in the all pay auction

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

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. Reputation and repetition reduce aggregate overdissipation, but they eliminate it only in conjunction with active participation.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 8 (November)
Pages: 974-997

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Handle: RePEc:eee:eecrev:v:54:y:2010:i:8:p:974-997
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