An experimental study of bidding in contests of incomplete information

*Dmitry Ryvkin
Department of Economics, Florida State University

Philip Brookins
Department of Economics, Florida State University

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     Last modified: March 8, 2011
     Presentation date: 03/12/2011 4:30 PM in NH 1120, Session A
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Abstract
In many contest situations, such as R&D competition and rent seeking, participants' costs are private information. We report the results of an experimental study of bidding in contests under different information and symmetry conditions about players' costs of effort. The theory predicts qualitatively different comparative statics between bids under complete and incomplete information in contests of two and more than two players. We use a 2x3 experimental design, (n=2, n=4)x(symmetric complete information, asymmetric complete information, incomplete information), to test the theoretical predictions. We find the comparative statics of bids across the information and symmetry conditions, and the qualitative differences in comparative statics across group sizes, in partial agreement with the theory. We also explore the desire to win as a behavioral determinant of overbidding and find no evidence it actually is.