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Exclusion in the all-pay auction: an experimental investigation

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Fehr, Dietmar; Schmid, Julia

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Corporate Editor Wissenschaftszentrum Berlin für Sozialforschung gGmbH
Abstract Contest or auction designers who want to maximize the overall revenue are frequently concerned with a trade-off between contest homogeneity and inclusion of bidders with high valuations. In our experimental study, we find that it is not profitable to exclude the most able bidder in favor of greater homogeneity among the remaining bidders, even if the theoretical exclusion principle predicts otherwise. This is because the strongest bidders considerably overexert. A possible explanation is that these bidders are afraid they will regret a low but risky bid if they lose and thus prefer a strategy which gives them a lower but secure pay-off. (author's abstract)
Keywords experiment; competition; heterogeneity; auction
Classification National Economy
Document language English
Publication Year 2014
City Berlin
Page/Pages 30 p.
Series Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Abteilung Verhalten auf Märkten, SP II 2014-206
Status Published Version; reviewed
Licence Deposit Licence - No Redistribution, No Modifications