Contests with money and time: Experimental evidence on overbidding in all-pay auctions
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12-02-2020_Time_auction_Breaba ...
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Final Accepted Manuscript
Affiliation
Univ Arizona, Dept EconUniv Arizona, Econ Sci Lab
Issue Date
2020-03
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Breaban, A., 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, 171, 391-405. https://doi.org/10.1016/j.jebo.2020.01.005Rights
© 2020 Elsevier B.V. All rights reserved.Collection Information
This item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at repository@u.library.arizona.edu.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. (C) 2020 Elsevier B.V. All rights reserved.Note
36 month embargo; published online: 19 February 2020ISSN
0167-2681Version
Final accepted manuscriptae974a485f413a2113503eed53cd6c53
10.1016/j.jebo.2020.01.005