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All-pay auctions with certain and uncertain prizes

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  • Sela, Aner
  • Minchuk, Yizhaq

Abstract

We study all-pay auctions with multiple prizes. The players have the same value for all the certain prizes except for one uncertain prize for which each player has a private value. We characterize the equilibrium strategy and show that if the number of prizes is smaller than the number of players, independent of the ranking of the uncertain prize, a player's probability to win as well as his expected utility increases in his value for this prize. We demonstrate that a stochastic dominance relation between two distribution functions of the players' private values may increase but also even decrease the players' ex-ante expected utility as well the players' expected total effort. Also, increasing the number of prizes may decrease the players' ex-ante expected utility. Thus, we may conclude that a larger number of prizes does not necessarily benefit the players in a contest.

Suggested Citation

  • Sela, Aner & Minchuk, Yizhaq, 2014. "All-pay auctions with certain and uncertain prizes," CEPR Discussion Papers 9908, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9908
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    More about this item

    Keywords

    All-pay auctions; Contests; Uncertain prizes;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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