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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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References

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  1. Domenico Menicucci, 2006. "Banning Bidders from All-pay Auctions," Economic Theory, Springer, Springer, vol. 29(1), pages 89-94, September.
  2. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, American Economic Association, vol. 86(1), pages 180-94, March.
  3. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics, EconWPA 9809003, EconWPA.
  4. Fang, Hanming, 2002. " Lottery versus All-Pay Auction Models of Lobbying," Public Choice, Springer, Springer, vol. 112(3-4), pages 351-71, September.
  5. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  6. Baye, M.R. & Kovenock, D. & De Vries, C., 1992. "The All-Pay Auction with Complete Information," Papers, Pennsylvania State - Department of Economics 8-92-1, Pennsylvania State - Department of Economics.
  7. Richard T. Boylan, 2000. "An optimal auction perspective on lobbying," Social Choice and Welfare, Springer, Springer, vol. 17(1), pages 55-68.
  8. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers, Pennsylvania State - Department of Economics 9-92-2, Pennsylvania State - Department of Economics.
  9. Moldovanu, Benny & Sela, Aner, 1999. "The Optimal Allocation of Prizes in Contests," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 99-75, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  10. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
  11. Bertoletti, Paolo, 2006. "A note on the Exclusion Principle," MPRA Paper 1085, University Library of Munich, Germany.
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Cited by:
  1. Subhashish Modak Chowdhury, 2009. "The all-pay auction with non-monotonic payoff," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS), School of Economics, University of East Anglia, Norwich, UK. 09-09, School of Economics, University of East Anglia, Norwich, UK..
  2. M. Magnani, 2006. "Electoral Competition and Incentives to Local Public Good Provision," Economics Department Working Papers 2006-EP13, Department of Economics, Parma University (Italy).

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