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Competition for Budget-Constrained Buyers: Exploring All-Pay Auctions

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Abstract

When faced with budget-constrained bidders, all-pay auctions revenue-dominate standard auctions (first and second-price), which, in a competitive market, gives an edge to the all-pay format. An equilibrium in which sellers compete with standard auctions fails to exist if the all-pay format is available. Assuming the budget is not severely limited, in the unique symmetric equilibrium sellers compete with all-pay auctions.

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  • Selcuk, Cemil, 2024. "Competition for Budget-Constrained Buyers: Exploring All-Pay Auctions," Cardiff Economics Working Papers E2024/26, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2024/26
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    1. Selcuk, Cemil, 2024. "All-pay vs. standard auctions when competing for budget-constrained buyers," Economics Letters, Elsevier, vol. 242(C).

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    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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