All-pay auctions with endogenous rewards
AbstractThis paper examines a perfectly discriminating contest (all-pay auction) with two asymmetric players. Valuations are endogenous and depend on the effort each player invests in the contest. The shape of the valuation function is common knowledge and differs between the contestants. Some key properties of R&D races, lobbying activity and sport contests are captured by this framework. Once the unique equilibrium in mixed strategies analyzed, we derive a closed form of the expected expenditure of both players. We characterize the expected expenditure by the means of incomplete Beta functions. We focus on unordered valuations.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2009059.
Date of creation: 01 Sep 2009
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all-pay auctions; contests;
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
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