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An analysis of the two-bidder all-pay auction with common values

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  • Chi, Chang Koo

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

This paper studies a symmetric two-bidder all-pay auction where the bidders compete for a prize whose unknown common value is either high or low. The bidders’ private signals (or types) are discrete and affiliated through the value. Even with Affiliated signals, monotonicity of equilibria can fail in the sense that the bidder With a higher signal does not always win the auction. I show that when monotonicity fails, there exist multiple symmetric equilibria but the bidder’s type-dependent payoff is invariant across the equilibria. The paper provides a closed-form formula for the equilibrium payoffs and a condition for rent dissipation.

Suggested Citation

  • Chi, Chang Koo, 2018. "An analysis of the two-bidder all-pay auction with common values," Discussion Paper Series in Economics 17/2018, Norwegian School of Economics, Department of Economics.
    • Handle: RePEc:hhs:nhheco:2018_017
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    References listed on IDEAS

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    More about this item

    Keywords

    All-pay auctions; common values; correlated signals; non-monotone equilibria; rent dissipation rent dissipation;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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