Dan Kovenock (Department of Economics, Purdue University, West Lafayette, IN 47907, USA) Michael R. Baye (Department of Economics, The Pennsylvania State University, State College, PA 16803, USA) Casper G. de Vries (Tinbergen Institute, P.O. Box 1738, 3000 DR Rotterdam, THE NETHERLANDS)
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In a (first price) all-pay auction, bidders simultaneously submit bids for an item. All players forfeit their bids, and the high bidder receives the item. This auction is widely used in economics to model rent seeking, R&D races, political contests, and job promotion tournaments. We fully characterize equilibrium for this class of games, and show that the set of equilibria is much larger than has been recognized in the literature. When there are more than two players, for instance, we show that even when the auction is symmetric there exists a continuum of asymmetric equilibria. Moreover, for economically important configurations of valuations, there is no revenue equivalence across the equilibria; asymmetric equilibria imply higher expected revenues than the symmetric equilibrium.
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Article provided by Springer in its journal Economic Theory.
Volume (Year): 8 (1996) Issue (Month): 2 () Pages: 291-305 Download reference. The following formats are available: HTML,
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