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Games 2013, 4(4), 608-623; doi:10.3390/g4040608

Bimodal Bidding in Experimental All-Pay Auctions

1
Alumna of the London School of Economics, London WC2A 2AE, UK
2
Walras Pareto Center, University of Lausanne, Lausanne-Dorigny CH-1015, Switzerland
*
Author to whom correspondence should be addressed.
Received: 17 July 2013 / Revised: 19 September 2013 / Accepted: 19 September 2013 / Published: 11 October 2013
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Abstract

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. Bidding behavior is, however, consistent with the predictions of a model with reference dependent preferences as proposed by the prospect theory.
Keywords: all-pay auction; prospect theory; experiment all-pay auction; prospect theory; experiment
This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

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MDPI and ACS Style

Ernst, C.; Thöni, C. Bimodal Bidding in Experimental All-Pay Auctions. Games 2013, 4, 608-623.

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