Contests with money and time:: Experimental evidence on overbidding in all-pay auctions
Breaban,A.G. Noussair,C.N. Popescu,Andreea Victoria
Breaban,A.G.
Noussair,C.N.
Popescu,Andreea Victoria
Abstract
Competition for a prize frequently takes the form of dedicating time toward winning a contest. Those who spend more time become more likely to obtain the prize. We model this competition as an all-pay auction under incomplete information, and report an experiment in which expenditures and rewards are in terms of time. In the experiment, subjects must stay in the laboratory doing nothing for an initially prespecified length of time. However, they can bid, in terms of time, to leave early. The auction has an all-pay structure, so that if an individual does not submit the highest bid within her group, she must stay for the additional time that she bid. We correlate behavior in this game with behavior in an isomorphic all-pay auction played with money bids. We also consider how two measures of sophistication, the Cognitive Reflection Test (CRT) score, and performance on a probability calibration task, correlate with behavior. We find strong similarities in overall behavior between the auctions conducted with money and with time. Bidding greater than equilibrium levels is typical, and as a consequence, average earnings are negative in both auctions. Thus, the result that there is overdissipation of rent in all-pay auctions extends to competition in terms of time.
Description
Publisher Copyright: © 2020 Elsevier B.V.
Date
2020-03
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
all-pay auction, experiment, time, overbidding
Citation
Breaban, A G, Noussair, C N & Popescu, A V 2020, 'Contests with money and time: Experimental evidence on overbidding in all-pay auctions', Journal of Economic Behavior & Organization, vol. 171, pp. 391-405. https://doi.org/10.1016/j.jebo.2020.01.005
License
info:eu-repo/semantics/closedAccess