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The all-pay auction with non-monotonic payoff

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  • Subhashish Modak Chowdhury

    (University of East Anglia)

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    Abstract

    We analyze an endogenous prize all-pay auction under complete information where it is possible that none of the bidders wins and the winning payoff becomes non-monotonic in own bid. We derive the conditions for the existence of pure strategy equilibria and fully characterize the unique mixed strategy equilibrium when pure strategy equilibria do not exist. The high-valuation bidder places two distinct mass points in his equilibrium mixed strategy and the equilibrium support of the low-valuation bidder is not continuous. Under common valuation, in the equilibrium mixed strategy both bidders place mass points at the same point of the support. Possible applications are discussed.

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    Bibliographic Info

    Paper provided by School of Economics, University of East Anglia, Norwich, UK. in its series Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) with number 09-09.

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    Date of creation: 01 Dec 2009
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    Handle: RePEc:uea:wcbess:09-09

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    Related research

    Keywords: contests; all-pay auction; no-win; non-monotonicity; pure strategy;

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    References

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    1. Kovenock, D. & de Vries, C.G., 1995. "The All-Pay Auction with Complete Information," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 311.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    2. Aloisio Araujo & Luciano I. de Castro & Humberto Moreira, 2006. "Non-Monotoniticies And The All-Pay Auction Tie-Breaking Rule," Economics Working Papers we065924, Universidad Carlos III, Departamento de Economía.
    3. Amegashie, J. Atsu, 2001. "An all-pay auction with a pure-strategy equilibrium," Economics Letters, Elsevier, vol. 70(1), pages 79-82, January.
    4. Yasar Barut & Dan Kovenock & Charles Noussair, 1999. "A Comparison of Multiple-Unit All-Pay and Winner-Pay Auctions Under Incomplete Information," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) FS IV 99-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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    6. 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.
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    11. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    12. Todd Kaplan, 2001. "All-Pay Auctions with Variable Rewards," Discussion Papers, Exeter University, Department of Economics 0109, Exeter University, Department of Economics.
    13. Bertoletti, Paolo, 2006. "On the reserve price in all-pay auctions with complete information and lobbying games," MPRA Paper 1083, University Library of Munich, Germany.
    14. Amegashie, J Atsu, 1999. " The Number of Rent-Seekers and Aggregate Rent-Seeking Expenditures: An Unpleasant Result," Public Choice, Springer, Springer, vol. 99(1-2), pages 57-62, April.
    15. Wakelin, Katharine, 2001. "Productivity growth and R&D expenditure in UK manufacturing firms," Research Policy, Elsevier, vol. 30(7), pages 1079-1090, August.
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    Cited by:
    1. Subhasish M. Chowdhury & Roman M. Sheremeta, 2010. "The Equivalence of Contests," Working Papers 10-07, Chapman University, Economic Science Institute.
    2. BOS, Olivier & RANGER, Martin, 2009. "All-pay auctions with endogenous rewards," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2009059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Subhasish M. Chowdhury & Dongryul Lee & Iryna Topolyan, 2013. "The Max-Min Group Contest," University of East Anglia Applied and Financial Economics Working Paper Series, School of Economics, University of East Anglia, Norwich, UK. 050, School of Economics, University of East Anglia, Norwich, UK..
    4. Chowdhury, Subhasish & Sheremeta, Roman, 2014. "Strategically Equivalent Contests," MPRA Paper 55450, University Library of Munich, Germany.

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