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All-pay aspects of decision making under public scrutiny

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  • Thomas Giebe
  • Paul Schweinzer

Abstract

We study decision making processes with non-standard all-pay structures. In our first group of applications, individual members of some institution—due to public pressure or expectation—propose reductions of their own income, e.g., corporate board members reducing their bonus payments in an economic downturn, or politicians who reduce their expense allowances after some scandal. In such situations, the most aggressive proposal might carry the day and win public credibility or moral kudos for the proposer. Everyone, however, suffers the cost of that winning proposal. In the second group of applications, all participants bear the total cost of all bids as, e.g., under the filibuster strategy of delaying legislative action. The common features of these situations are a winner-take-all structure, non-standard payment rules, and nonvoluntary participation. We find that, in the equilibria of these games, everybody suffers a loss (with the possible exception of the winner).

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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 11/27.

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Handle: RePEc:yor:yorken:11/27

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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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Web page: http://www.york.ac.uk/economics/
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Related research

Keywords: Auctions; Contests; Truth-telling;

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  1. Baye, M.R. & Kovenock D. & De Vries, C.G., 2000. "Comparative Analysis of Litigation Systems: an Auction-Theoretic Approach," Purdue University Economics Working Papers 1137, Purdue University, Department of Economics.
  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.
  3. Kaplan, Todd, et al, 2002. "All-Pay Auctions with Variable Rewards," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 417-30, December.
  4. Hopkins Ed & Kornienko Tatiana, 2007. "Cross and Double Cross: Comparative Statics in First Price and All Pay Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-25, May.
  5. Maasland, E. & Onderstal, A.M., 2002. "Auctions with Financial Externalities," Discussion Paper 2002-22, Tilburg University, Center for Economic Research.
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