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Silent Interests and All-Pay Auctions

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  • Konrad, Kai A.

Abstract

If firms compete in all-pay auctions with complete information, silent shareholdings introduce asymmetric externalities into the allpay auction framework. If the strongest firm owns a large share in the second strongest firm, this may make the strongest firm abstain from bidding. As a consequence, equilibrium profits of both firms may increase, but the prize may be allocated less efficiently. The reverse ownership structure is also likely to increase the profits of the firms involved in the ownership relationship but without these negative efficiency effects. --

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Bibliographic Info

Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2005/8.

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Date of creation: 2005
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Handle: RePEc:zbw:fubsbe:20058

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Keywords: all-pay auctions; externalities; contests; silent minority shareholdings; ownership structure;

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References

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  1. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "The All-Pay Auction With Complete Information," Purdue University Economics Working Papers 1007, Purdue University, Department of Economics.
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Citations

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Cited by:
  1. Lu, Jingfeng, 2012. "Optimal auctions with asymmetric financial externalities," Games and Economic Behavior, Elsevier, vol. 74(2), pages 561-575.
  2. Fu, Qiang & Lu, Jingfeng, 2013. "Competitive effect of cross-shareholdings in all-pay auctions with complete information," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 267-277.
  3. Aner Sela, 2012. "Sequential two-prize contests," Economic Theory, Springer, vol. 51(2), pages 383-395, October.
  4. Aner Sela, 2008. "Sequential Two-Prize Contests," Working Papers 0803, Ben-Gurion University of the Negev, Department of Economics.
  5. Frode Meland & Odd Rune Straume, 2006. "Outsourcing in Contests," CESifo Working Paper Series 1658, CESifo Group Munich.
  6. Martin Gonzalez-Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," 2004 Meeting Papers 199, Society for Economic Dynamics.
  7. 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).
  8. Bettina Klose & Dan Kovenock J., 2012. "Extremism Drives Out Moderation," CESifo Working Paper Series 3804, CESifo Group Munich.
  9. Jia, Hao & Skaperdas, Stergios & Vaidya, Samarth, 2013. "Contest functions: Theoretical foundations and issues in estimation," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 211-222.
  10. Cohen, Chen & Sela, Aner, 2008. "Allocation of prizes in asymmetric all-pay auctions," European Journal of Political Economy, Elsevier, vol. 24(1), pages 123-132, March.
  11. Sela, Aner, 2008. "Sequential Two-Prize Contests," CEPR Discussion Papers 6769, C.E.P.R. Discussion Papers.
  12. Metzger, Lars Peter, 2014. "Invader strategies in the war of attrition with private information," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 160-166.
  13. Fosfuri, Andrea & Rønde, Thomas, 2009. "Leveraging resistance to change and the skunk works model of innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 274-289, October.

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