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Sequential All-Pay Auctions with Noisy Outputs

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  • Sela, Aner
  • Segev, Ella

Abstract

We study a sequential all-pay auction with two contestants who are privately informed about a parameter (ability) that affects their cost of effort. In the model, contestant 1 (the first mover) exerts an effort in the first period which translates into an observable output but with some noise, and contestant 2 (the second mover) observes this noisy output. Then, contestant 2 exerts an effort in the second period, and wins the contest if her output is larger than or equal to the observed noisy output of contestant 1; otherwise, contestant 1 wins. 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 expected highest effort in this contest.

Suggested Citation

  • Sela, Aner & Segev, Ella, 2011. "Sequential All-Pay Auctions with Noisy Outputs," CEPR Discussion Papers 8509, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8509
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    Cited by:

    1. Segev, Ella & Sela, Aner, 2014. "Multi-stage sequential all-pay auctions," European Economic Review, Elsevier, vol. 70(C), pages 371-382.
    2. Franke, Jörg & Leininger, Wolfgang & Wasser, Cédric, 2018. "Optimal favoritism in all-pay auctions and lottery contests," European Economic Review, Elsevier, vol. 104(C), pages 22-37.
    3. J. Atsu Amegashie, 2018. "The Political Economy of Too-Big-To-Fail," CESifo Working Paper Series 7403, CESifo.
    4. Clark, Derek J. & Nilssen, Tore, 2018. "Keep on fighting: The dynamics of head starts in all-pay auctions," Games and Economic Behavior, Elsevier, vol. 110(C), pages 258-272.
    5. Nava Kahana & Doron Klunover, 2017. "Sequential Lottery Contests with Multiple Participants," Working Papers tax-mpg-rps-2017-02, Max Planck Institute for Tax Law and Public Finance.
    6. Noam Cohen & Guy Maor & Aner Sela, 2018. "Two-stage elimination contests with optimal head starts," Review of Economic Design, Springer;Society for Economic Design, vol. 22(3), pages 177-192, December.
    7. Sven Fischer & Werner Güth & Todd R. Kaplan & Ro'i Zultan, 2014. "Auctions and Leaks: A Theoretical and Experimental Investigation," Jena Economics Research Papers 2014-027, Friedrich-Schiller-University Jena.
    8. Minchuk, Yizhaq & Sela, Aner, 2018. "Prebidding first-price auctions with and without head starts," Mathematical Social Sciences, Elsevier, vol. 91(C), pages 51-55.
    9. Jain, Shaili & Chen, Yiling & Parkes, David C., 2014. "Designing incentives for online question-and-answer forums," Games and Economic Behavior, Elsevier, vol. 86(C), pages 458-474.
    10. Chiappinelli, Olga, 2014. "An elimination contest with non-sunk bids," MPRA Paper 56140, University Library of Munich, Germany.
    11. Clark, Derek J. & Nilssen, Tore, 2018. "Beating the Matthew Effect: Head Starts and Catching Up in a Dynamic All-Pay Auction," Memorandum 2/2018, Oslo University, Department of Economics.

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    More about this item

    Keywords

    Noisy outputs; Sequential contests;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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