IDEAS home Printed from https://ideas.repec.org/a/eee/gamebe/v92y2015icp138-149.html
   My bibliography  Save this article

Tie-breaks and bid-caps in all-pay auctions

Author

Listed:
  • Szech, Nora

Abstract

We revisit the two bidder complete information all-pay auction with bid-caps introduced by Che and Gale (1998), dropping their assumption that tie-breaking must be symmetric. Any choice of tie-breaking rule leads to a different set of Nash equilibria. Compared to the optimal bid-cap of Che and Gale we obtain that in order to maximize the sum of bids, the designer prefers to set a less restrictive bid-cap combined with a tie-breaking rule which slightly favors the weaker bidder. Moreover, the designer is better off breaking ties deterministically in favor of the weak bidder than symmetrically.

Suggested Citation

  • Szech, Nora, 2015. "Tie-breaks and bid-caps in all-pay auctions," Games and Economic Behavior, Elsevier, vol. 92(C), pages 138-149.
    • Handle: RePEc:eee:gamebe:v:92:y:2015:i:c:p:138-149
    DOI: 10.1016/j.geb.2015.05.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0899825615000883
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.geb.2015.05.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, Decembrie.
    2. Nicolas Sahuguet & Nicola Persico, 2006. "Campaign spending regulation in a model of redistributive politics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(1), pages 95-124, May.
    3. Sergiu Hart, 2014. "Allocation Games with Caps: From Captain Lotto to All-Pay Auctions," Discussion Paper Series dp670, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    4. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 291-305.
    5. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, vol. 54(1), pages 63-82, January.
    6. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, January.
    7. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-651, June.
    8. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    9. Nicolas Sahuguet, 2006. "Caps in asymmetric all-pay auctions with incomplete information," Economics Bulletin, AccessEcon, vol. 3(9), pages 1-8.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Llorente-Saguer, Aniol & Sheremeta, Roman M. & Szech, Nora, 2023. "Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions," European Economic Review, Elsevier, vol. 154(C).
    2. Roman M. Sheremeta, 2016. "The pros and cons of workplace tournaments," IZA World of Labor, Institute of Labor Economics (IZA), pages 302-302, October.
    3. Hervas-Drane, Andres & Shelegia, Sandro, 2022. "Price competition with a stake in your rival," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    4. Aner Sela, 2023. "Resource allocations in the best-of-k ( $$k=2,3$$ k = 2 , 3 ) contests," Journal of Economics, Springer, vol. 139(3), pages 235-260, August.
    5. Goel, Sumit & Goyal, Amit, 2023. "Optimal tie-breaking rules," Journal of Mathematical Economics, Elsevier, vol. 108(C).
    6. Ivan Pastine & Tuvana Pastine, 2023. "Equilibrium existence and expected payoffs in all-pay auctions with constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 983-1007, May.
    7. Hironori Otsubo, 2015. "Nash Equilibria in a Two-Person Discrete All-Pay Auction with Unfair Tie-Break and Complete Information," Economics Bulletin, AccessEcon, vol. 35(4), pages 245-245.
    8. Vladimir Petkov, 2023. "Prize formation and sharing in multi-stage contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(1), pages 259-289, January.
    9. Alan Gelder & Dan Kovenock & Brian Roberson, 2022. "All-pay auctions with ties," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(4), pages 1183-1231, November.
    10. Oleg Muratov, 2021. "All-Pay Auctions with Reserve Price and Bid Cap," Diskussionsschriften dp2106, Universitaet Bern, Departement Volkswirtschaft.
    11. Shelegia, Sandro & Wilson, Chris M., 2022. "Costly participation and default allocations in all-pay contests," MPRA Paper 115027, University Library of Munich, Germany.
    12. Franke, Jörg & Metzger, Lars P., 2023. "Repeated Contests with Draws," Ruhr Economic Papers 1016, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    13. Correia-da-Silva, João, 2020. "Self-rejecting mechanisms," Games and Economic Behavior, Elsevier, vol. 120(C), pages 434-457.
    14. Olszewski, Wojciech & Siegel, Ron, 2019. "Bid caps in large contests," Games and Economic Behavior, Elsevier, vol. 115(C), pages 101-112.
    15. David K. Levine & Andrea Mattozzi, 2020. "Voter Turnout with Peer Punishment," American Economic Review, American Economic Association, vol. 110(10), pages 3298-3314, October.
    16. Cohen, Chen & Levi, Ofer & Sela, Aner, 2019. "All-pay auctions with asymmetric effort constraints," Mathematical Social Sciences, Elsevier, vol. 97(C), pages 18-23.
    17. Bo Chen & Marco Serena, 2020. "Bid Caps and Disclosure Policies," Working Papers tax-mpg-rps-2020-08, Max Planck Institute for Tax Law and Public Finance.
    18. Llorente-Saguer, Aniol & Sheremeta, Roman & Szech, Nora, 2016. "Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions," MPRA Paper 71202, University Library of Munich, Germany.
    19. Subhasish M. Chowdhury & Patricia Esteve‐González & Anwesha Mukherjee, 2023. "Heterogeneity, leveling the playing field, and affirmative action in contests," Southern Economic Journal, John Wiley & Sons, vol. 89(3), pages 924-974, January.
    20. Chen, Bo & Ma, Lijun & Zhu, Zhaobo & Zhou, Yu, 2020. "Disclosure policies in all-pay auctions with bid caps and stochastic entry," Economics Letters, Elsevier, vol. 186(C).
    21. Chen, Bo, 2019. "On the effects of bid caps in all-pay auctions," Economics Letters, Elsevier, vol. 177(C), pages 60-65.
    22. Olszewski, Wojciech & Siegel, Ron, 2023. "Equilibrium existence in contests with bid caps," Journal of Mathematical Economics, Elsevier, vol. 104(C).
    23. Gelder, Alan & Kovenock, Dan & Sheremeta, Roman, 2015. "Behavior in All-Pay Auctions with Ties," MPRA Paper 67517, University Library of Munich, Germany.
    24. Chen, Bo & Serena, Marco, 2023. "Disclosure Policies in All-Pay Auctions with Bid Caps," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 141-160.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boyer, Pierre C. & Konrad, Kai A. & Roberson, Brian, 2017. "Targeted campaign competition, loyal voters, and supermajorities," Journal of Mathematical Economics, Elsevier, vol. 71(C), pages 49-62.
    2. Ewerhart, Christian, 2017. "Contests with small noise and the robustness of the all-pay auction," Games and Economic Behavior, Elsevier, vol. 105(C), pages 195-211.
    3. Ivan Pastine & Tuvana Pastine, 2023. "Equilibrium existence and expected payoffs in all-pay auctions with constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 983-1007, May.
    4. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    5. HHironori Otsubo, 2012. "Contests with Incumbency Advantages: An Experiment Investigation of the Effect of Limits on Spending Behavior and Outcome," Jena Economics Research Papers 2012-020, Friedrich-Schiller-University Jena.
    6. Alcalde, José & Dahm, Matthias, 2010. "Rent seeking and rent dissipation: A neutrality result," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 1-7, February.
    7. Ezra Einy & Ori Haimanko & Ram Orzach & Aner Sela, 2014. "Common-Value All-Pay Auctions with Asymmetric Information and Bid Caps," Working Papers 1402, Ben-Gurion University of the Negev, Department of Economics.
    8. Llorente-Saguer, Aniol & Sheremeta, Roman M. & Szech, Nora, 2023. "Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions," European Economic Review, Elsevier, vol. 154(C).
    9. Segev, Ella & Sela, Aner, 2014. "Multi-stage sequential all-pay auctions," European Economic Review, Elsevier, vol. 70(C), pages 371-382.
    10. Ezra Einy & Mridu Prabal Goswami & Ori Haimanko & Ram Orzach & Aner Sela, 2017. "Common-value all-pay auctions with asymmetric information," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(1), pages 79-102, March.
    11. Cohen, Chen & Levi, Ofer & Sela, Aner, 2019. "All-pay auctions with asymmetric effort constraints," Mathematical Social Sciences, Elsevier, vol. 97(C), pages 18-23.
    12. Johannes Münster, 2007. "Contests with investment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 849-862.
    13. Lang, Matthias & Seel, Christian & Strack, Philipp, 2014. "Deadlines in stochastic contests," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 134-142.
    14. Einav Hart & Judith Avrahami & Yaakov Kareev, 2016. "Enlarging the market yet decreasing the profit: An experimental study of competitive behavior when investment affects the prize," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 11(4), pages 380-390, July.
    15. Aner Sela, 2018. "Reverse Contests," Working Papers 1804, Ben-Gurion University of the Negev, Department of Economics.
    16. Christian Ewerhart, 2014. "Elastic contests and the robustness of the all-pay auctions," ECON - Working Papers 155, Department of Economics - University of Zurich.
    17. Ella Segev & Aner Sela, 2011. "Sequential All-Pay Auctions with Head Starts and Noisy Outputs," Working Papers 1106, Ben-Gurion University of the Negev, Department of Economics.
    18. Llorente-Saguer, Aniol & Sheremeta, Roman & Szech, Nora, 2016. "Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions," MPRA Paper 71202, University Library of Munich, Germany.
    19. Ella Segev & Aner Sela, 2014. "Sequential all-pay auctions with head starts," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(4), pages 893-923, December.
    20. repec:cup:judgdm:v:11:y:2016:i:4:p:380-390 is not listed on IDEAS
    21. Hirata, Daisuke, 2014. "A model of a two-stage all-pay auction," Mathematical Social Sciences, Elsevier, vol. 68(C), pages 5-13.

    More about this item

    Keywords

    All-pay auctions; Contests; Bid-caps; Tie-breaking; Lobbying;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:92:y:2015:i:c:p:138-149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.