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An experimental study of bidding in contests of incomplete information

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  • Philip Brookins
  • Dmitry Ryvkin

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Abstract

In many contest situations, such as R&D competition and rent seeking, participants’ costs are private information. We report the results of an experimental study of bidding in contests under different information and symmetry conditions about players’ costs of effort. The theory predicts qualitatively different comparative statics between bids under complete and incomplete information in contests of two and more than two players. We use a 2×3 experimental design, (n=2, n=4)×(symmetric complete information, asymmetric complete information, incomplete information), to test the theoretical predictions. We find the comparative statics of bids across the information and symmetry conditions, and the qualitative differences in comparative statics across group sizes, in partial agreement with the theory. Copyright Economic Science Association 2014

Suggested Citation

  • Philip Brookins & Dmitry Ryvkin, 2014. "An experimental study of bidding in contests of incomplete information," Experimental Economics, Springer;Economic Science Association, vol. 17(2), pages 245-261, June.
  • Handle: RePEc:kap:expeco:v:17:y:2014:i:2:p:245-261
    DOI: 10.1007/s10683-013-9365-9
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    Citations

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    Cited by:

    1. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    2. Schmidt, Klaus & Fey, Lisa & Thoma, Carmen, 2017. "Competition and Incentives," Rationality and Competition Discussion Paper Series 31, CRC TRR 190 Rationality and Competition.
    3. 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.
    4. Roman M. Sheremeta, 2014. "Behavioral Dimensions of Contests," Working Papers 14-14, Chapman University, Economic Science Institute.
    5. Timothy N. Cason & Roman M. Sheremeta & Jingjing Zhang, 2015. "Asymmetric and Endogenous Communication in Competition between Groups," Working Papers 15-01, Chapman University, Economic Science Institute.
    6. Sheremeta, Roman, 2014. "Behavior in Contests," MPRA Paper 57451, University Library of Munich, Germany.
    7. Yoshio Kamijo, 2014. "A theory of sanctions: Objectives, degree of heterogeneity, and growth potential matter for optimal use of carrot or stick," Working Papers SDES-2014-13, Kochi University of Technology, School of Economics and Management, revised Oct 2014.
    8. Luisa Herbst, 2016. "Who Pays to Win Again? The Joy of Winning in Contest Experiments," Working Papers tax-mpg-rps-2016-06, Max Planck Institute for Tax Law and Public Finance.
    9. Dutcher, E. Glenn & Balafoutas, Loukas & Lindner, Florian & Ryvkin, Dmitry & Sutter, Matthias, 2015. "Strive to be first or avoid being last: An experiment on relative performance incentives," Games and Economic Behavior, Elsevier, vol. 94(C), pages 39-56.
    10. Kamijo, Yoshio, 2016. "Rewards versus punishments in additive, weakest-link, and best-shot contests," Journal of Economic Behavior & Organization, Elsevier, vol. 122(C), pages 17-30.
    11. Brookins, Philip & Lightle, John P. & Ryvkin, Dmitry, 2015. "An experimental study of sorting in group contests," Labour Economics, Elsevier, vol. 35(C), pages 16-25.
    12. Philip Brookins & Dmitry Ryvkin & Andrew Smyth, 2018. "Indefinitely Repeated Contests: An Experimental Study," Working Papers 18-01, Chapman University, Economic Science Institute.
    13. Boosey, Luke & Brookins, Philip & Ryvkin, Dmitry, 2017. "Contests with group size uncertainty: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 105(C), pages 212-229.
    14. repec:kap:expeco:v:20:y:2017:i:4:d:10.1007_s10683-017-9519-2 is not listed on IDEAS
    15. repec:eee:eecrev:v:98:y:2017:i:c:p:111-125 is not listed on IDEAS
    16. Zeynep B. Irfanoglu & Shakun D. Mago & Roman M. Sheremeta, 2014. "The New Hampshire Effect: Behavior in Sequential and Simultaneous Election Contests," Working Papers 14-15, Chapman University, Economic Science Institute.
    17. Subhasish M. Chowdhury & Anwesha Mukherjee & Theodore L. Turocy, 2016. "That's the ticket: Explicit lottery randomisation and learning in Tullock contests," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 16-07, School of Economics, University of East Anglia, Norwich, UK..
    18. Irfanoglu, Zeynep & Mago, Shakun & Sheremeta, Roman, 2015. "New Hampshire Effect: Behavior in Sequential and Simultaneous Election Contests," MPRA Paper 67520, University Library of Munich, Germany.
    19. Kai A. Konrad & Florian Morath, 2017. "Escalation in Dynamic Conflict: On Beliefs and Selection," Working Papers tax-mpg-rps-2017-05, Max Planck Institute for Tax Law and Public Finance.
    20. Timothy N. Cason & Roman M. Sheremeta & Jingjing Zhang, 2017. "Asymmetric and endogenous within-group communication in competitive coordination games," Experimental Economics, Springer;Economic Science Association, vol. 20(4), pages 946-972, December.
    21. David J. Freeman & Erik O. Kimbrough & Garrett M. Petersen & Hanh T. Tong, 2017. "Instructions," Discussion Papers dp17-12, Department of Economics, Simon Fraser University.
    22. Francesco Fallucchi & Enrique Fatas & Felix Koelle & Ori Weisel, 2018. "Not all Group Members are created Equal: Heterogeneous Abilities in Inter-group Contests," Discussion Papers 2018-06, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    23. Chen, Zhuoqiong & Ong, David & Sheremeta, Roman, 2015. "Competition Between and Within Universities: Theoretical and Experimental Investigation of Group Identity and the Desire to Win," MPRA Paper 67522, University Library of Munich, Germany.
    24. repec:elg:eechap:15325_10 is not listed on IDEAS

    More about this item

    Keywords

    Contest; Incomplete information; Bidding; Experiment; C72; C91; D72; D82;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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