All-pay auctions: Implementation and optimality
AbstractThis paper analyzes how all-pay auctions with endogenous prizes can be used to provide effort incentives. We show that wide classes of effort distributions can be implemented as equilibrium outcomes of such games. We also ask how all-pay auctions have to be structured so as to induce high expected highest efforts without generating excessive wasteful efforts of losers. All-pay auctions with endogenous prizes can do better than all-pay auctions with fixed prizes in this respect, in particular, when the prize function is approximately linear. We use the results to compare patents and prizes as innovation incentives, and to explore promotion incentives in organizations.
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Bibliographic InfoPaper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 108.
Date of creation: Jan 2013
Date of revision:
Contests; all-pay auctions; endogenous prizes; implementation;
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-03 (All new papers)
- NEP-CTA-2013-02-03 (Contract Theory & Applications)
- NEP-MIC-2013-02-03 (Microeconomics)
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