Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56692
Authors: 
Fehr, Dietmar
Schmid, Julia
Year of Publication: 
2011
Series/Report no.: 
SFB 649 discussion paper 2011-009
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 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 considerably 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.
Subjects: 
experiments
contests
all-pay auction
heterogeneity
regret aversion
JEL: 
C72
C92
D84
Document Type: 
Working Paper

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