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All-Pay Auctions with Weakly Risk-Averse Buyers

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Author Info

  • Gadi Fibich

    (School of Mathematical Sciences, Tel Aviv University)

  • Arieh Gavious

    (School of Industrial Engineering and Management, Faculty of Engineering Sciences, Ben-Gurion University)

  • Aner Sela

    (Department of Economics, Ben-Gurion University)

Abstract

We use perturbation analysis to study independent private-value all-pay auctions with weakly risk-averse buyers. We show that under weak risk aversion: 1) Buyers with low values bid lower and buyers with high values bid higher than they would bid in the risk neutral case. 2) Buyers with low values bid lower and buyers with high values bid higher than they would bid in a first-price auction. 3) Buyers' expected utilities in an all-pay auction are lower than in a first-price auction. 4) The seller's expected payoff in an all-pay auction may be either higher or lower than in the risk neutral case. 5) The seller's expected payoff in an all-pay auction may be either higher or lower than in a first-price auction.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.14.

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Date of creation: Jan 2004
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Handle: RePEc:fem:femwpa:2004.14

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Keywords: Private-value auctions; Risk aversion; Perturbation analysis;

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References

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  1. 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.
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Cited by:
  1. Lugovskyy, Volodymyr & Puzzello, Daniela & Tucker, Steven, 2010. "An experimental investigation of overdissipation in the all pay auction," European Economic Review, Elsevier, vol. 54(8), pages 974-997, November.
  2. Fehr, Dietmar & Schmid, Julia, 2010. "Exclusion in the all-pay auction: An experimental investigation," Discussion Papers, Research Unit: Market Behavior SP II 2010-04, Social Science Research Center Berlin (WZB).
  3. Noussair, Charles & Silver, Jonathon, 2006. "Behavior in all-pay auctions with incomplete information," Games and Economic Behavior, Elsevier, vol. 55(1), pages 189-206, April.
  4. Hannah Hörisch & Oliver Kirchkamp, 2010. "Less fighting than expected," Public Choice, Springer, vol. 144(1), pages 347-367, July.

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