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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. Gavious, Arieh & Moldovanu, Benny & Sela, Aner, 2000. "Bid Costs and Endogenous Bid Caps," Sonderforschungsbereich 504 Publications 01-19, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    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.
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    9. Françoise Forges & Ram Orzach, 2010. "Core-stable Rings in Second Price Auctions with Common Values," Working Papers 2010.119, Fondazione Eni Enrico Mattei.
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    13. Malueg, David A. & Orzach, Ram, 2009. "Revenue comparison in common-value auctions: Two examples," Economics Letters, Elsevier, vol. 105(2), pages 177-180, November.
    14. Karl Wärneryd, 2012. "Multi-player contests with asymmetric information," Economic Theory, Springer, vol. 51(2), pages 277-287, October.
    15. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
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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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