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Empirical Evidence on Competition and Revenue in an All-Pay Contest

Author

Listed:
  • Zhongmin Wang

    (Resources for the Future)

  • Minbo Xu

    (Beijing Normal University)

Abstract

The total revenue from an “all-pay contest” is the sum of expenditures from all individual players, so it is important to ask whether it increases with the number of actual players—which is our definition of competition. This is the first paper to use field data to study this question empirically. Using novel instrumental variables, we document strong empirical evidence that the revenue of a penny auction—which is a form of all-pay contest that recently emerged on the Internet—increases with the number of bidders. Our findings cast doubt on the standard model of all-pay contests that presumes that all bidders are fully informed.

Suggested Citation

  • Zhongmin Wang & Minbo Xu, 2016. "Empirical Evidence on Competition and Revenue in an All-Pay Contest," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(3), pages 429-448, November.
    • Handle: RePEc:kap:revind:v:49:y:2016:i:3:d:10.1007_s11151-016-9511-6
    DOI: 10.1007/s11151-016-9511-6
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    References listed on IDEAS

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    Cited by:

    1. Yangguang Huang & Ming He, 2021. "Structural Analysis Of Tullock Contests With An Application To U.S. House Of Representatives Elections," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 1011-1054, August.
    2. Minbo Xu & Sanxi Li & Jianye Yan, 2019. "All‐Pay Auctions With A Buy‐Price Option," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 617-630, January.

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    More about this item

    Keywords

    All-pay contest; Competition; Number of bidders; Penny auction; Revenue;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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