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

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Author Info
Bertoletti, Paolo

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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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File URL: http://mpra.ub.uni-muenchen.de/1083/
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Publisher 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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Related research
Keywords: all-pay auctions reserve price economic theory of lobbying

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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References listed on IDEAS
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  1. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  2. 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.
    Other versions:
  3. Domenico Menicucci, 2006. "Banning Bidders from All-pay Auctions," Economic Theory, Springer, vol. 29(1), pages 89-94, September. [Downloadable!] (restricted)
  4. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June. [Downloadable!] (restricted)
    Other versions:
  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. [Downloadable!] (restricted)
    Other versions:
  6. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March. [Downloadable!] (restricted)
  7. Richard T. Boylan, 2000. "An optimal auction perspective on lobbying," Social Choice and Welfare, Springer, vol. 17(1), pages 55-68. [Downloadable!] (restricted)
    Other versions:
  8. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics. [Downloadable!]
  9. Bertoletti, Paolo, 2006. "A note on the Exclusion Principle," MPRA Paper 1085, University Library of Munich, Germany. [Downloadable!]
  10. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
    Other versions:
  11. Fang, Hanming, 2002. " Lottery versus All-Pay Auction Models of Lobbying," Public Choice, Springer, vol. 112(3-4), pages 351-71, September. [Downloadable!] (restricted)
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