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Jump Bidding and Budget Constraints in All-Pay Auctions and Wars of Attrition

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Author Info
Eddie Dekel
Matthew Jackson
Asher Wolinsky

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Abstract

We study all-pay auctions (or wars of attrition), where the highest bidder wins an object, but all bidders pay their bids. We consider such auctions when two bidders alternate in raising their bids and where all aspects of the auction are common knowledge including bidders' valuations. We analyze how the ability to "jump-bid," or raise bids by more than the minimal necessary increment affects the outcome of the auction. We also study the impact of budget caps on total bids. We show that both of these features, which are common in practice but absent from the previous literature, matter signi cantly in determining the outcome of the auctions.

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File URL: http://www.kellogg.northwestern.edu/research/math/papers/1454.pdf
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1454.

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Date of creation: Nov 2007
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Handle: RePEc:nwu:cmsems:1454

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Related research
Keywords: All-Pay Auctions; Jump-Bidding; Auctions; War of Attrition.;

Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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This page was last updated on 2009-11-25.

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