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All-Pay Auction Equilibria In Contests

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  • José Alcalde

    ()
    (Universidad de Alicante)

  • Matthias Dahm

    (Universitat Rovira i Virgili)

Abstract

We analyze (non-deterministic) contests with anonymous contest success functions. There is no restriction on the number of contestants or on their valuations for the prize. We provide intuitive and easily verifiable conditions for the existence of an equilibrium with properties similar to the one of the (deterministic) all-pay auction. Since these conditions are fulfilled for a wide array of situations, the predictions of this equilibrium are very robust to the specific details of the contest. An application of this result contributes to fill a gap in the analysis of the popular Tullock rent- seeking game because it characterizes properties of an equilibrium for increasing returns to scale larger than two, for any number of contestants and in contests with or without a common value.

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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2007-27.

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Length: 19 pages
Date of creation: Dec 2007
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2007-27

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Keywords: (non-) deterministic contest; all-pay auction; contest success functions.;

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  1. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  2. Baye, M.R. & Kovenock, D. & De Varies, C.G., 1990. "The All-Pay Auction With Complete Information," Papers 9051, Tilburg - Center for Economic Research.
  3. Che, Yeon-Koo & Gale, Ian, 2000. "Difference-Form Contests and the Robustness of All-Pay Auctions," Games and Economic Behavior, Elsevier, vol. 30(1), pages 22-43, January.
  4. Konrad, Kai A., 2000. "Trade contests," Journal of International Economics, Elsevier, vol. 51(2), pages 317-334, August.
  5. Konrad, Kai A., 2007. "Strategy in contests: an introduction," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
  6. Fang, Hanming, 2002. " Lottery versus All-Pay Auction Models of Lobbying," Public Choice, Springer, vol. 112(3-4), pages 351-71, September.
  7. David P. Baron & Daniel Diermeier, 2007. "Strategic Activism and Nonmarket Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 599-634, 09.
  8. José Alcalde & Matthias Dahm, 2007. "Tullock And Hirshleifer: A Meeting Of The Minds," Working Papers. Serie AD 2007-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
  10. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "Rigging The Lobbying Process: An Application Of The All- Pay Auction," Purdue University Economics Working Papers 1002, Purdue University, Department of Economics.
  11. Perez-Castrillo, J David & Verdier, Thierry, 1992. " A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-50, April.
  12. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
  13. Konrad, Kai A., 2000. "Spatial contests," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 965-974, August.
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  15. Baye, M.R. & Kovenock, D., 1993. "The Solution to the Tullock Rent-Seeking Game When R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 9368, Tilburg - Center for Economic Research.
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  19. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1994. " The Solution to the Tullock Rent-Seeking Game When R Is Greater Than 2: Mixed-Strategy Equilibria and Mean Dissipation Rates," Public Choice, Springer, vol. 81(3-4), pages 363-80, December.
  20. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  21. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
  22. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
  23. David Malueg & Andrew Yates, 2006. "Equilibria in rent-seeking contests with homogeneous success functions," Economic Theory, Springer, vol. 27(3), pages 719-727, 04.
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Citations

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Cited by:
  1. J. Atsu Amegashie, 2012. "A Nested Contest: Tullock Meets the All-Pay Auction," Working Papers 1211, University of Guelph, Department of Economics and Finance.
  2. José Alcalde & Matthias Dahm, 2007. "Tullock And Hirshleifer: A Meeting Of The Minds," Working Papers. Serie AD 2007-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  3. Alcalde, José & Dahm, Matthias, 2010. "Rent seeking and rent dissipation: A neutrality result," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 1-7, February.
  4. Konrad, Kai A. & Kovenock, Dan, 2009. "The alliance formation puzzle and capacity constraints," Economics Letters, Elsevier, vol. 103(2), pages 84-86, May.
  5. YILDIRIM, Mustafa, 2013. "Accuracy in Contests: Players' Perspective," Working Paper Series in Economics and Finance 746, Stockholm School of Economics, revised 24 Sep 2013.
  6. Amegashie, J. Atsu, 2012. "A nested contest: Tullock meets the All-Pay Auction," MPRA Paper 41654, University Library of Munich, Germany, revised 03 Sep 2012.

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