The role of luck in political and economic competition: noisy all-pay auctions

James W. Boudreau, Haikady N. Nagaraja, Lucas Rentschler, Shane D. Sanders

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We study all-pay auctions with noise both theoretically and experimentally. First we show theoretically that all-pay auctions with noise (or “luck”) can be surprisingly like standard all-pay auctions with complete information in several important respects. Equilibria in both formats feature the same expected expenditures and payoffs. One difference, however, is that without noise predictions are in mixed strategies, while with noise predictions are in pure strategies. We next report the results of an experiment on our model and find qualitative support for the predicted equivalence of expected expenditures. Our experimental results on the noisy version of the model are particularly interesting, as subjects’ behavior appears to be more closely in line with the model’s theoretical equilibrium predictions than the treatment without noise in terms of reduced variance.

Original languageEnglish (US)
Pages (from-to)137-157
Number of pages21
JournalPublic Choice
Volume199
Issue number1-2
DOIs
StatePublished - Apr 2024

Keywords

  • All-pay auctions
  • C72
  • Contests
  • D44
  • D72
  • D82
  • Noise
  • Rent-seeking

ASJC Scopus subject areas

  • Economics and Econometrics
  • Sociology and Political Science

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