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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. We find that aggregate over-dissipation diminishes but is not eliminated with repetition, and that repetition, in conjunction with active participation generates bids consistent with the static Nash predictions.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8604.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:8604
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