All-Pay Auctions with Endogenous Rewards
AbstractThis paper examines a perfectly discriminating contest (all-pay auction) with two asymmetric players. Valuations are endogenous and depend on the effort each player invests in the contest. The shape of the valuation function is common knowledge and differs between the contestants. Some key properties of R&D races, lobbying activity and sport contests are captured by this framework. Once the unique equilibrium in mixed strategies analyzed, we derive a closed form of the expected expenditure of both players. We characterize the expected expenditure by means of incomplete Beta functions. We focus on unordered valuations.
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Bibliographic InfoPaper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 46.
Date of creation: 23 Feb 2010
Date of revision:
All-pay auctions; contests;
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-06 (All new papers)
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