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Common-Value All-Pay Auctions with Asymmetric Information and Bid Caps

Author

Listed:
  • Ezra Einy

    () (BGU)

  • Ori Haimanko

    () (BGU)

  • Ram Orzach

    () (Oakland University, USA)

  • Aner Sela

    () (BGU)

Abstract

We study two-player common-value all-pay auctions (contests) with asymmetric information under the assumption that one of the players has an information advantage over his opponent and both players are budget-constrained. We generalize the results for all-pay auctions with complete information, and show that in all-pay auctions with asymmetric information, sufficiently high (but still binding) bid caps do not change the players' expected total effort compared to the benchmark auction without any bid cap. Furthermore, we show that there are bid caps that increase the players' expected total effort compared to the benchmark. Finally, we demonstrate that there are bid caps which may have an unanticipated effect on the players' expected payoffs - one player's information advantage may turn into a disadvantage as far as his equilibrium payoff is concerned.

Suggested Citation

  • Ezra Einy & Ori Haimanko & Ram Orzach & Aner Sela, 2014. "Common-Value All-Pay Auctions with Asymmetric Information and Bid Caps," Working Papers 1402, Ben-Gurion University of the Negev, Department of Economics.
  • Handle: RePEc:bgu:wpaper:1402
    as

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    References listed on IDEAS

    as
    1. Benny Moldovanu & Aner Sela & Xianwen Shi, 2012. "Carrots And Sticks: Prizes And Punishments In Contests," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 453-462, April.
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    Cited by:

    1. Aiche, A. & Einy, Ezra & Haimanko, Ori & Moreno, Diego & Selay, A. & Shitovitz, Benyamin, 2016. "Information advantage in common-value classic Tullock contests," UC3M Working papers. Economics 23939, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Ezra Einy & Ori Haimanko & Ram Orzach & Aner Sela, 2016. "Common-value all-pay auctions with asymmetric information and bid caps," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(1), pages 63-88, March.
    3. repec:bla:ecinqu:v:55:y:2017:i:3:p:1497-1510 is not listed on IDEAS

    More about this item

    Keywords

    Common-value all-pay auctions; asymmetric information; information advantage; bid caps.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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