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All-pay auction equilibria in contests

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  • Alcalde, José
  • Dahm, Matthias

Abstract

We analyze (non-deterministic) contests with anonymous contest success functions. There is no restriction on the number of contestants or on their valuations for the prize. We provide intuitive and easily verifiable conditions for the existence of an equilibrium with properties similar to the one of the (deterministic) all-pay auction. Since these conditions are fulfilled for a wide array of situations, the predictions of this equilibrium are very robust to the specific details of the contest. An application of this result contributes to fill a gap in the analysis of the popular Tullock rent- seeking game because it characterizes properties of an equilibrium for increasing returns to scale larger than two, for any number of contestants and in contests with or without a common value. Keywords: (non-) deterministic contest, all-pay auction, contest success functions. JEL Classification Numbers: C72 (Noncooperative Games), D72 (Economic Models of Political Processes: Rent-Seeking, Elections), D44 (Auctions).

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Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/5368.

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Date of creation: 2008
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Handle: RePEc:urv:wpaper:2072/5368

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Keywords: Subhastes; Política; Models economètrics; Renda (Teoria econòmica); Eleccions; Jocs; Teoria de; 338 - Situació econòmica. Política econòmica. Gestió; control i planificació de l'economia. Producció. Serveis. Turisme. Preus;

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  1. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers, UCLA Department of Economics 452, UCLA Department of Economics.
  2. Perez-Castrillo, J David & Verdier, Thierry, 1992. " A General Analysis of Rent-Seeking Games," Public Choice, Springer, Springer, vol. 73(3), pages 335-50, April.
  3. 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.
  4. Che, Yeon-Koo & Gale, Ian, 2000. "Difference-Form Contests and the Robustness of All-Pay Auctions," Games and Economic Behavior, Elsevier, Elsevier, vol. 30(1), pages 22-43, January.
  5. 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, American Economic Association, vol. 83(1), pages 289-94, March.
  6. José Alcalde & Matthias Dahm, 2007. "Tullock And Hirshleifer: A Meeting Of The Minds," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2007-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, Elsevier, vol. 18(1), pages 135-140, January.
  8. David Malueg & Andrew Yates, 2006. "Equilibria in rent-seeking contests with homogeneous success functions," Economic Theory, Springer, Springer, vol. 27(3), pages 719-727, 04.
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  10. Alesina, Alberto & Spolaore, Enrico, 2006. "Conflict, defense spending, and the number of nations," European Economic Review, Elsevier, Elsevier, vol. 50(1), pages 91-120, January.
  11. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers, Pennsylvania State - Department of Economics 10-93-9, Pennsylvania State - Department of Economics.
  12. David P. Baron & Daniel Diermeier, 2007. "Strategic Activism and Nonmarket Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 16(3), pages 599-634, 09.
  13. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, Elsevier, vol. 10(1), pages 41-60, May.
  14. Konrad, Kai A., 2007. "Strategy in contests: an introduction," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
  15. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(1), pages 1-26, January.
  16. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, Springer, vol. 98(3-4), pages 415-30, March.
  17. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1994. " The Solution to the Tullock Rent-Seeking Game When R Is Greater Than 2: Mixed-Strategy Equilibria and Mean Dissipation Rates," Public Choice, Springer, Springer, vol. 81(3-4), pages 363-80, December.
  18. Fang, Hanming, 2002. " Lottery versus All-Pay Auction Models of Lobbying," Public Choice, Springer, Springer, vol. 112(3-4), pages 351-71, September.
  19. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 643-51, June.
  20. Konrad, Kai A., 2000. "Spatial contests," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 18(6), pages 965-974, August.
  21. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, Springer, vol. 7(2), pages 283-290.
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Cited by:
  1. Amegashie, J. Atsu, 2012. "A nested contest: Tullock meets the All-Pay Auction," MPRA Paper 41654, University Library of Munich, Germany, revised 03 Sep 2012.
  2. José Alcalde & Matthias Dahm, 2007. "Tullock and Hirshleifer: a meeting of the minds," Review of Economic Design, Springer, Springer, vol. 11(2), pages 101-124, September.
  3. Konrad, Kai A. & Kovenock, Dan, 2009. "The alliance formation puzzle and capacity constraints," Economics Letters, Elsevier, Elsevier, vol. 103(2), pages 84-86, May.
  4. Alcalde, José & Dahm, Matthias, 2010. "Rent seeking and rent dissipation: A neutrality result," Journal of Public Economics, Elsevier, Elsevier, vol. 94(1-2), pages 1-7, February.
  5. J. Atsu Amegashie, 2012. "A Nested Contest: Tullock Meets the All-pay Auction," CESifo Working Paper Series 3976, CESifo Group Munich.
  6. YILDIRIM, Mustafa, 2013. "Accuracy in Contests: Players' Perspective," Working Paper Series in Economics and Finance 746, Stockholm School of Economics, revised 24 Sep 2013.

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