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Common-Value All-Pay Auctions With Asymmetric Information

  • Ezra Einy

    ()

    (BGU)

  • Ori Haimanko

    ()

    (BGU)

  • Ram Orzach

    ()

    (Oakland University, Rochester, MI 48309, USA)

  • Aner Sela

    ()

    (BGU)

We study two-player common-value all-pay auctions in which the players have ex-ante asymmetric information represented by finite partitions of the set of possible values of winning. We consider two families of such auctions: in the first, one of the players has an information advantage (henceforth, IA) over his opponent, and in the second, no player has an IA over his opponent. We show that there exists a unique equilibrium in auctions with IA and explicitly characterize it; for auctions without IA we find a sufficient condition for the existence of equilibrium in monotonic strategies. We further show that, with or without IA, the ex-ante distribution of equilibrium effort is the same for every player (and hence the players' expected efforts are equal), although their expected payoffs are different. In auctions with IA, the players have the same ex-ante probability of winning, which is not the case in auctions without IA.

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File URL: http://in.bgu.ac.il/en/humsos/Econ/Working/1306.pdf
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Paper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 1306.

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Length: 31 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:bgu:wpaper:1306
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  1. Benny Moldovanu & Aner Sela & Xianwen Shi, 2010. "Carrots and Sticks: Prizes and Punishments in Contests," Working Papers tecipa-399, University of Toronto, Department of Economics.
  2. Arieh Gavious & Benny Moldovanu & Aner Sela, 2002. "Bid Costs and Endogenous Bid Caps," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 709-722, Winter.
  3. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "Rigging The Lobbying Process: An Application Of The All- Pay Auction," Purdue University Economics Working Papers 1002, Purdue University, Department of Economics.
  4. repec:dau:papers:123456789/7891 is not listed on IDEAS
  5. Moldovanu, Benny & Sela, Aner, 2002. "Contest Architecture," Sonderforschungsbereich 504 Publications 02-06, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  6. 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.
  7. Wärneryd, Karl, 2001. "Information in conflicts
    [Information in Konflikten]
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-11, Social Science Research Center Berlin (WZB).
  8. Malueg, David A. & Orzach, Ram, 2009. "Revenue comparison in common-value auctions: Two examples," Economics Letters, Elsevier, vol. 105(2), pages 177-180, November.
  9. EINY, Ezra & HAIMANKO, Ori & ORZACH, Ram & SELA, Aner, 2001. "Dominance solvability of second-price auctions with differential information," CORE Discussion Papers 2001007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Francoise Forges & Ram Orzach, 2011. "Core-stable rings in second price auctions with common values," Post-Print hal-00659016, HAL.
  11. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
  12. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, 01.
  13. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  14. Krishna, Vijay & Morgan, John, 1997. "An Analysis of the War of Attrition and the All-Pay Auction," Journal of Economic Theory, Elsevier, vol. 72(2), pages 343-362, February.
  15. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, vol. 54(1), pages 63-82, January.
  16. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Moldovanu, Benny & Sela, Aner, 1999. "The Optimal Allocation of Prizes in Contests," Sonderforschungsbereich 504 Publications 99-75, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  18. Rajiv Vohra, 1997. "Incomplete Information, Incentive Compatibility and the Core," Working Papers 97-11, Brown University, Department of Economics.
  19. Karl Wärneryd, 2012. "Multi-player contests with asymmetric information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(2), pages 277-287, October.
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