Title: Distributing Two Prizes in the All-Pay Auction
Abstract: Contest designers are frequently concerned with a trade-o¤ between contest homogeneity and inclusion of contestants with high valuations. Based on the theoretical analysis by Clark and Riis (AER 1998), we experimentally investigate how two di¤erent distribution mechanisms for multiple prizes (simultaneously and sequentially) can solve this trade o¤. We nd that contestants considerably overexert, while the degree of heterogeneity has only little inuence on the overall performance. Contestants with low valuations tend to drop out in both mechanisms. However, unlike the theoretical prediction this drop out is less severe when prizes are distributed sequentially. Whereas in the simultaneous distribution mechanism the contestants sensitivity to the valuations is qualitatively well described by theory, in the sequential distribution mechanism the contestants do not seem to fully capture its strategic aspects. The behavior in both distribution mechanisms is also prone to individual characteristics such as gender and risk aversion. Keywords: experiments, contests, multiple prizes, heterogeneity JEL classi cation numbers: C72, C92, D84 For helpful comments we thank Dorothea Kubler, Radosveta Ivanova-Stenzel, Axel Werwatz and seminar participants at Humboldt Universitat zu Berlin, the CESifo 08 workshop, the IZA 08 workshop and the IMEBE 08 conference. We are indebted to Kai Priesack and Wei Min Wang for research assistence and for help with conducting the experiments. We also thank Matthias Wibral for sharing us with his computer program. Financial support from the Deutsche Forschungsgemeinschaft (DFG) through SFB 649 Economic Risk is gratefully acknowledged. Corresponding Author: Julia Schmid, Faculty of Economics and Management, H 50, Strase des 17. Juni 135, 10623 Berlin, Germany. Email: [email protected]
Publication Year: 2009
Publication Date: 2009-01-01
Language: en
Type: article
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