Bid caps in large contests

Wojciech Olszewski; Ron Siegel

doi:10.1016/j.geb.2019.02.012

Bid caps in large contests

Wojciech Olszewski, Ron Siegel

Economics

Research output: Contribution to journal › Article › peer-review

16 Scopus citations

Abstract

We study the effect of rigid and flexible bid caps on contestants’ aggregate costs and aggregate bids in all-pay contests with a large number of heterogeneous contestants and prizes. We show that rigid caps always decrease aggregate costs, whereas flexible caps have essentially no effect on aggregate costs. Rigid caps decrease aggregate bids when costs are linear or concave, but increase aggregate bids under some conditions when costs are convex. Flexible caps always decrease aggregate bids.

Original language	English (US)
Pages (from-to)	101-112
Number of pages	12
Journal	Games and Economic Behavior
Volume	115
DOIs	https://doi.org/10.1016/j.geb.2019.02.012
State	Published - May 2019

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

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10.1016/j.geb.2019.02.012

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author = "Wojciech Olszewski and Ron Siegel",

note = "Funding Information: We thank the associate editor and several referees for excellent comments that greatly improved the paper. We thank Bela Szabadi for excellent research assistance. Financial support from the NSF (grant SES-1325968) is gratefully acknowledged. Publisher Copyright: {\textcopyright} 2019 Elsevier Inc.",

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JO - Games and Economic Behavior

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ER -

Bid caps in large contests

Abstract

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