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Comparative Statics and Welfare in Heterogeneous All-Pay Auctions: Bribes, Caps, and Performance Thresholds

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  • Kirkegaard Rene

    () (Brock University)

Abstract

Comparative statics for all-pay auctions with two heterogeneous and privately informed bidders are analyzed. General results are provided for when one bidder becomes stochastically weaker. The comparative statics are fully characterized for truncations. Moreover, we show that expected revenue may increase when one bidder weakens. In the second part of the paper we consider a dynamic contest in which beliefs change endogenously: the first bidder may preempt the auction by paying a bribe. An all-pay auction is held if the bribe is not paid, in which case the second bidder revises his beliefs. With the option to bribe, expected payoff decreases for a set of types of at least one bidder, possibly the bidder ostensibly advantaged by the preemption option. However, the expected revenue and the ex ante payoff of both bidders may improve.

Suggested Citation

  • Kirkegaard Rene, 2008. "Comparative Statics and Welfare in Heterogeneous All-Pay Auctions: Bribes, Caps, and Performance Thresholds," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-32, September.
  • Handle: RePEc:bpj:bejtec:v:8:y:2008:i:1:n:21
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    References listed on IDEAS

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    Cited by:

    1. Kräkel, Matthias & Szech, Nora & von Bieberstein, Frauke, 2014. "Externalities in recruiting," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 123-135.
    2. Kirkegaard, René, 2012. "Favoritism in asymmetric contests: Head starts and handicaps," Games and Economic Behavior, Elsevier, vol. 76(1), pages 226-248.
    3. Ivan Pastine & Tuvana Pastine, 2012. "All-pay contests with constraints," Working Papers 201204, School of Economics, University College Dublin.
    4. Costas Roumanias, 2008. "Auctioning Public Office," Discussion Paper Series 2008_08, Department of Economics, University of Macedonia, revised Sep 2008.

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