2011-02-17Buch DOI: 10.18452/4299
Exclusion in the All-Pay Auction
An Experimental Investigation
Contest or auction designers who want to maximize the overall revenue are frequently con- cerned with a trade-off between contest homogeneity and inclusion of contestants with high valuations. In our experimental study, we find that it is not profitable to exclude the most able contestant in favor of greater homogeneity among the remaining contestants, even if the theoretical exclusion principle predicts otherwise. This is because the strongest contestants con- siderably overexert. A possible explanation is that these contestants are afraid they will regret a low but risky bid if they lose and thus prefer a strategy which gives them a low but secure pay-off.
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