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Bimodal Bidding in Experimental All-Pay Auctions

We report results from experimental first-price, sealed-bid, all-pay auctions for a good with a common and known value. We observe bidding strategies in groups of two and three bidders and under two extreme information conditions. As predicted by the Nash equilibrium, subjects use mixed strategies. In contrast to the prediction under standard assumptions bids are drawn from a bimodal distribution: very high and very low bids are much more frequent than intermediate bids. Standard risk preferences cannot account for our results. However, bidding behavior is consistent with the predictions of a model with reference dependent preferences as proposed by the prospect theory.
Year of publication:
2009-08
Authors: Ernst, Christiane ; Thöni, Christian
Institutions: School of Economics and Political Science, Universität St. Gallen
Subject: All-pay Auction | Prospect Theory | Experiment
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Extent:
application/pdf
Series:
Type of publication: Book / Working Paper
Language: English
Notes:
20 pages
Classification: D44 - Auctions ; D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legistures, and Voting Behavior ; D80 - Information and Uncertainty. General ; C91 - Laboratory, Individual Behavior
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