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Common-Value All-Pay Auctions With Asymmetric Information

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Author Info

  • Ezra Einy

    ()
    (BGU)

  • Ori Haimanko

    ()
    (BGU)

  • Ram Orzach

    ()
    (Oakland University, Rochester, MI 48309, USA)

  • Aner Sela

    ()
    (BGU)

Registered author(s):

    Abstract

    We study two-player common-value all-pay auctions in which the players have ex-ante asymmetric information represented by finite partitions of the set of possible values of winning. We consider two families of such auctions: in the first, one of the players has an information advantage (henceforth, IA) over his opponent, and in the second, no player has an IA over his opponent. We show that there exists a unique equilibrium in auctions with IA and explicitly characterize it; for auctions without IA we find a sufficient condition for the existence of equilibrium in monotonic strategies. We further show that, with or without IA, the ex-ante distribution of equilibrium effort is the same for every player (and hence the players' expected efforts are equal), although their expected payoffs are different. In auctions with IA, the players have the same ex-ante probability of winning, which is not the case in auctions without IA.

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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 1306.

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    Length: 31 pages
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:bgu:wpaper:1306

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    Keywords: Common-value all-pay auctions; asymmetric information; information advantage;

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    References

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    1. Arieh Gavious & Benny Moldovanu & Aner Sela, 2002. "Bid Costs and Endogenous Bid Caps," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 709-722, Winter.
    2. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, vol. 54(1), pages 63-82, January.
    3. Moldovanu, Benny & Sela, Aner & Shi, Xianwen, 2008. "Carrots and Sticks: Prizes and Punishments in Contests," CEPR Discussion Papers 6770, C.E.P.R. Discussion Papers.
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    5. Wärneryd, Karl, 2000. "Information in Conflicts," Working Paper Series in Economics and Finance 388, Stockholm School of Economics.
    6. Orzach, Ram & Forges, Françoise, 2011. "Core-stable rings in second price auctions with common values," Economics Papers from University Paris Dauphine 123456789/7891, Paris Dauphine University.
    7. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-94, March.
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    11. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
    12. Moldovanu, Benny & Sela, Aner, 2002. "Contest Architecture," Sonderforschungsbereich 504 Publications 02-06, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
    13. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
    14. Vohra, Rajiv, 1999. "Incomplete Information, Incentive Compatibility, and the Core," Journal of Economic Theory, Elsevier, vol. 86(1), pages 123-147, May.
    15. Malueg, David A. & Orzach, Ram, 2009. "Revenue comparison in common-value auctions: Two examples," Economics Letters, Elsevier, vol. 105(2), pages 177-180, November.
    16. Krishna, Vijay & Morgan, John, 1997. "An Analysis of the War of Attrition and the All-Pay Auction," Journal of Economic Theory, Elsevier, vol. 72(2), pages 343-362, February.
    17. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, 01.
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    Cited by:
    1. Wärneryd, Karl, 2013. "Common-value contests with asymmetric information," Economics Letters, Elsevier, vol. 120(3), pages 525-527.

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