The over-weighting of unfair tie in all-pay contest: An experimental study

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Abstract

This paper examines experimentally a contest in which the organizer takes a share of the prize if there is a tie. Our hypothesis is that contestants perceive this as unfair and that this perception has a non-proportional effect on the bids. The results indicate that despite the very low probability of a tie, contestants over-weight its importance and sharply decrease their bids if the organizer takes a share. We show that a fair contest is the optimal strategy for the organizer since the increase in the average bid in a "fair" contest is higher than the organizer's decrease in expected value from losing his share in a tie.

Original languageEnglish
Pages (from-to)301-311
Number of pages11
JournalInternational Journal of Economic Theory
Volume8
Issue number3
DOIs
StatePublished - 1 Sep 2012

Keywords

  • All-pay contest
  • Contestants
  • Experiment
  • Fairness effect
  • Tie

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