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Public Choice

, Volume 179, Issue 3–4, pp 195–208 | Cite as

Valuation structure in incomplete information contests: experimental evidence

  • Diego Aycinena
  • Rimvydas Baltaduonis
  • Lucas RentschlerEmail author
Article

Abstract

We experimentally examine perfectly discriminating contests under three valuation structures: pure common-value, pure private-value and a case with both private and common value components. In line with the results from the previous literature, we find that, regardless of valuation structure, contestants often choose very conservative expenditures, and very aggressive expenditures. Average expenditures exceed Nash equilibrium predictions. In valuation structures with a common value component, contestants often choose expenditures in excess of the expected value of the prize conditional on winning the contest. That is, they often guarantee themselves negative payoffs in expectation.

Keywords

Contests Experiments Winner’s curse 

JEL Classification

D44 D80 

Notes

Acknowledgements

Financial support from Gettysburg College is gratefully acknowledged. Thanks also to Jorge Chang Urrea for outstanding research assistance. We have benefited from comments and suggestions from participants in seminars at Universidad Francisco Marroquín, the International ESA Conference, and the International Conference on Game Theory at Stony Brook.

Supplementary material

11127_2018_568_MOESM1_ESM.pdf (1.3 mb)
Supplementary material 1 (pdf 1291 KB)

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsUniversidad del RosarioBogotáColombia
  2. 2.Department of EconomicsGettysburg CollegeGettysburgUSA
  3. 3.Department of Economics and FinanceUtah State UniversityLoganUSA

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