On the Continuous Equilibria of Affiliated-Value, All-Pay Auctions with Private Budget Constraints
AbstractWe consider all-pay auctions in the presence of interdependent, affiliated valuations and private budget constraints. For the sealed-bid, all-pay auction we characterize a symmetric equilibrium in continuous strategies for the case of N bidders and we investigate its properties. Budget constraints encourage more aggressive bidding among participants with large endowments and intermediate valuations. We extend our results to the war of attrition where we show that budget constraints lead to a uniform amplification of equilibrium bids among bidders with sufficient endownments. An example shows that with both interdependent valuations and private budget constraints, a revenue ranking between the two mechanisms is generally not possible.
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Bibliographic InfoPaper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-019.
Length: 44 pages
Date of creation: 23 Apr 2012
Date of revision:
All-Pay Auction; War of Attrition; Budget Constraints; Common Values; Private Values; Affiliation; Contests;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-CTA-2012-05-22 (Contract Theory & Applications)
- NEP-MIC-2012-05-22 (Microeconomics)
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