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Sequential All-Pay Auctions with Head Starts and Noisy Outputs

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  • Ella Segev

    ()
    (Department of Industrial Engineering and Management,Ben-Gurion University of the Negev, Israel)

  • Aner Sela

    ()
    (Economics Department, Ben-Gurion University of the Negev, Ben-Gurion University of the Negev, Israel)

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    Abstract

    We study a sequential (Stackelberg) all-pay auction with two contestants who are privately informed about a parameter (ability) that affects their cost of effort. Contestant 1 (the fi?rst mover) exerts an effort in the fi?rst period, while contestant 2 (the second mover) observes the effort of contestant 1 and then exerts an effort in the second period. Contestant 2 wins the contest if his effort is larger than or equal to the effort of contestant 1; otherwise, contestant 1 wins. We characterize the unique subgame perfect equilibrium of this sequential all-pay auction and analyze the use of head starts to improve the contestants' performances. We also study this model when contestant 1 exerts an effort in the fi?rst period which translates into an observable output but with some noise. We study two variations of this model where contestant 1 either knows or does not know the realization of the noise before she chooses her effort. Contestant 2 does not know the realization of the noise in both variations. For both variations, we characterize the subgame perfect equilibrium and investigate the effect of a random noise on the contestants' performance.

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    Bibliographic Info

    Paper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 1106.

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    Length: 37pages
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:bgu:wpaper:1106

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    Keywords: Sequential all-pay auctions; head starts; noisy outputs.;

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    References

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    Cited by:
    1. Segev, Ella & Sela, Aner, 2014. "Sequential all-pay auctions with noisy outputs," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 251-261.

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