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Exclusion in the All-Pay Auction: An Experimental Investigation

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  • Dietmar Fehr
  • Julia Schmid

Abstract

Contest or auction designers who want to maximize the overall revenue are frequently con- cerned 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 most able contestant in favor of greater homogeneity among the remaining contestants, even if the theoretical exclusion principle predicts otherwise. This is because the strongest contestants con- siderably overexert. A possible explanation is that these contestants are afraid they will regret a low but risky bid if they lose and thus prefer a strategy which gives them a low but secure pay-off.

Suggested Citation

  • Dietmar Fehr & Julia Schmid, 2011. "Exclusion in the All-Pay Auction: An Experimental Investigation," SFB 649 Discussion Papers SFB649DP2011-009, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2011-009
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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2011-009.pdf
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    References listed on IDEAS

    as
    1. Emel Filiz-Ozbay & Erkut Y. Ozbay, 2007. "Auctions with Anticipated Regret: Theory and Experiment," American Economic Review, American Economic Association, vol. 97(4), pages 1407-1418, September.
    2. Kräkel, Matthias, 2008. "Emotions in tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 204-214, July.
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    More about this item

    Keywords

    experiments; contests; all-pay auction; heterogeneity; regret aversion;
    All these keywords.

    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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