Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 796

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Design of Experiments: Laboratory, Individual ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• Subject: All-pay auction ; Rent-seeking ; Bid-caps ; Tie-breaks ; Contest design

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Llorente-Saguer, Aniol ; Sheremeta, Roman M. ; Szech, Nora
• Event: Veröffentlichung
• (who): Queen Mary University of London, School of Economics and Finance
• (where): London
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/175233
• Last update: 10.03.2025, 11:44 AM CET