Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions
A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the "discouragement effect." Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer's revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning.
Year of publication: |
2016
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Authors: | Llorente-Saguer, Aniol ; Sheremeta, Roman M. ; Szech, Nora |
Publisher: |
Berlin : Wissenschaftszentrum Berlin für Sozialforschung (WZB) |
Subject: | all-pay auction | rent-seeking | bid-caps | tie-breaks | contest design |
Saved in:
freely available
Series: | WZB Discussion Paper ; SP II 2016-307 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 859634175 [GVK] hdl:10419/141440 [Handle] RePEc:zbw:wzbeoc:SPII2016307 [RePEc] |
Classification: | C72 - Noncooperative Games ; C91 - Laboratory, Individual Behavior ; D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legistures, and Voting Behavior |
Source: |
Persistent link: https://www.econbiz.de/10011478768