Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101452
Authors: 
Fehr, Dietmar
Schmid, Julia
Year of Publication: 
2014
Series/Report no.: 
WZB Discussion Paper SP II 2014-206
Abstract: 
Contest or auction designers who want to maximize the overall revenue are frequently concerned with a trade-off between contest homogeneity and inclusion of bidders with high valuations. In our experimental study, we find that it is not profitable to exclude the most able bidder in favor of greater homogeneity among the remaining bidders, even if the theoretical exclusion principle predicts otherwise. This is because the strongest bidders considerably overexert. A possible explanation is that these bidders are afraid they will regret a low but risky bid if they lose and thus prefer a strategy which gives them a lower but secure pay-off.
Subjects: 
experiments
contests
all-pay auction
heterogeneity
regret aversion
JEL: 
C72
C92
D84
Document Type: 
Working Paper

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