Behavioral Experiment Of "penny Auction" Based On Time Constraint And Compensation

All-pay contests exists widely in real economic activities.Regardless of the result,participants are required to pay for competition.The penny auction is one of All-pay contests model,which attracting bidders through lower payment price for high-value item,but the bidders in the auction have to pay a certain cost for bidding.The penny auction website obtained a lot of benefits from the auction fees based on this auction model,and attracted behavioral economists to analyze the irrational bidding behavior of bidders from the aspects of sunk cost,number of participants,risk preference of participants and signaling strategy.There a lot of economic activities similarly to the penny auction model,such as over competition of Chinese education and rent-seeking behavior.But behavioral economists' experimental data based on the penny auction cannot explain those economic activities,because they have never take time constraint and compensation into consideration,therefore the experimental data cannot explain why participants always overinvest.Therefore,WeChat small program had been developed to help explore the impact of the time constraint and compensation on individual's investment decision under the all-pay contests,and we recruited 20 college students to participate the experiments.The basic framework of this paper is “problem raising – analyzing – answering”.In order to conduct experiments scientifically,we studied the experiments conduct by behavioral economists,and design the experiments such as learning effects,and then we take time constraint and compensation into consideration for further analyzed.The specific results are as follows:(1)The auction with time constraint will result in bidders' overinvestment.Because the time constraint make bidders feel nervous,then reduce bidders' ability of receiving and processing information,which leading to irrational bidding behavior.(2)Different amount of compensation resulted in bidders' different decision.The small amount has little effect on the bidder's bidding strategy.And the bidders prefer risk aversion behavior under excessive amount.The other experiments results are similar to behavioral economists' findings.The number of participants in the auction,the cost of sinking and the signaling strategy affect the bidder's competition awareness,"loss aversion" psychology and competition awareness,resulting in the bidder's overbidding behavior,then improving the website's revenue greatly.People often adopt excessive investment behavior in some economic activities,such as education investment and rent-seeking.This paper help revealing the reasons for individual's excessive investment in all-pay contests,which can be used to optimize or solve other problems may lead to overinvest.