Llorente-Saguer, Aniol and Sheremeta, Roman and Szech, Nora (2016): Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions.
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Abstract
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.
Item Type: | MPRA Paper |
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Original Title: | Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions |
Language: | English |
Keywords: | all-pay auction, rent-seeking, bid-caps, tie-breaks, contest design |
Subjects: | C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior |
Item ID: | 71202 |
Depositing User: | Roman Sheremeta |
Date Deposited: | 13 May 2016 04:25 |
Last Modified: | 26 Sep 2019 08:54 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/71202 |