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Playing the field in all-pay auctions

Author

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  • Daniel G. Stephenson

    (Virginia Commonwealth University)

  • Alexander L. Brown

    (Texas A&M University)

Abstract

We provide the first examination of all-pay auctions using continuous-time protocols, allowing subjects to adjust their bid at will, observe payoffs almost instantaneously, and gain more experience through repeated-play than in previous, discrete-time, implementations. Unlike our predecessors—who generally find overbidding—we observe underbidding relative to Nash equilibrium. To test the predictions of evolutionary models, we vary the number of bidders and prizes across treatments. If two bidders compete for a single prize, evolutionary models predict convergence to equilibrium. If three bidders compete for two prizes, evolutionary models predict non-convergent cyclical behavior. Consistent with evolutionary predictions, we observe cyclical behavior in both auctions and greater instability in two-prize auctions. These results suggest that evolutionary models can provide practitioners in the field with additional information about long-run aggregate behavior that is absent from conventional models.

Suggested Citation

  • Daniel G. Stephenson & Alexander L. Brown, 2021. "Playing the field in all-pay auctions," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 489-514, June.
    • Handle: RePEc:kap:expeco:v:24:y:2021:i:2:d:10.1007_s10683-020-09669-5
    DOI: 10.1007/s10683-020-09669-5
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    More about this item

    Keywords

    All pay auctions; Evolutionary game theory; Experiment;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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