Playing the field in all-pay auctions

• Published in: Experimental economics : a journal of the Economic Science Association Vol. 24; no. 2; pp. 489 - 514
• Main Authors: Stephenson, Daniel G., Brown, Alexander L.
• Format: Journal Article
• Language: English
• Published: New York Springer US 01.06.2021; Springer Nature B.V
• Subjects: Auctions; Behavior; Behavioral/Experimental Economics; Bids; Convergence; Economic theory; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Equilibrium; Game Theory; Microeconomics; Operations Research/Decision Theory; Original Paper; Social and Behav. Sciences; All pay auctions; D44; C92; Experiment; C73; Evolutionary game theory
• ISSN: 1386-4157; 1573-6938
• DOI: 10.1007/s10683-020-09669-5

We provide the first examination of all-pay auctions using continuous-time protocols, allowing subjects to adjust their bid at will, observe payoffs almost instantaneously, and gain more experience through repeated-play than in previous, discrete-time, implementations. Unlike our predecessors—who generally find overbidding—we observe underbidding relative to Nash equilibrium. To test the predictions of evolutionary models, we vary the number of bidders and prizes across treatments. If two bidders compete for a single prize, evolutionary models predict convergence to equilibrium. If three bidders compete for two prizes, evolutionary models predict non-convergent cyclical behavior. Consistent with evolutionary predictions, we observe cyclical behavior in both auctions and greater instability in two-prize auctions. These results suggest that evolutionary models can provide practitioners in the field with additional information about long-run aggregate behavior that is absent from conventional models.