An experimental investigation of overdissipation in the all pay auction

Lugovskyy, Volodymyr and Puzzello, Daniela and Tucker, Steven (2008): An experimental investigation of overdissipation in the all pay auction.

Abstract

Pervasive overbidding represents a well-documented feature of all-pay auctions. Aggregate bids exceed Nash predictions in laboratory experiments, and individuals often submit bids that guarantee negative profits. This paper examines three factors that may reduce pervasive overbidding: (a) repetition (experience), (b) reputation (strangers vs. partners) and (c) active participation. We find that aggregate over-dissipation diminishes but is not eliminated with repetition, and that repetition, in conjunction with active participation generates bids consistent with the static Nash predictions.

• Item Type: MPRA Paper
• Language: English
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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