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On the reserve price in all-pay auctions with complete information and lobbying games

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  • Bertoletti, Paolo

Abstract

We show that the seller’s optimal reserve price in an all-pay auction with complete information is higher than in a standard auction. We use our results to re-consider some findings of the literature that models lobbying games as all-pay auctions. In particular, we show that the so-called Exclusion Principle appears to rely crucially on the implicit assumption of a “weak” (in terms of bargaining power) seller, and does not hold if she regards bidders’ valuations as iid according to a monotonic hazard rate. Our preliminary results for the case of independent but asymmetric bidders make it even more suspicious.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1083.

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Date of creation: Jan 2006
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Handle: RePEc:pra:mprapa:1083

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Keywords: all-pay auctions; reserve price; economic theory of lobbying;

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  1. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-94, March.
  2. Bertoletti, Paolo, 2006. "A note on the Exclusion Principle," MPRA Paper 1085, University Library of Munich, Germany.
  3. Baye, M.R. & Kovenock, D. & De Vries, C., 1992. "The All-Pay Auction with Complete Information," Papers 8-92-1, Pennsylvania State - Department of Economics.
  4. Richard T. Boylan, 1996. "An optimal auction perspective on lobbying," Public Economics 9602001, EconWPA.
  5. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June.
  6. Fang, Hanming, 2002. " Lottery versus All-Pay Auction Models of Lobbying," Public Choice, Springer, vol. 112(3-4), pages 351-71, September.
  7. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
  8. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  9. Domenico Menicucci, 2006. "Banning Bidders from All-pay Auctions," Economic Theory, Springer, vol. 29(1), pages 89-94, September.
  10. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  11. Moldovanu, Benny & Sela, Aner, 1999. "The Optimal Allocation of Prizes in Contests," Sonderforschungsbereich 504 Publications 99-75, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
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