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On the Continuous Equilibria of Affiliated-Value, All-Pay Auctions with Private Budget Constraints, Second Version

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Listed:
  • Maciej H. Kotowski

    (John F. Kennedy School of Government, Harvard University)

  • Fei Li

    (Department of Economics, University of North Carolina, Chapel Hill)

Abstract

We consider all-pay auctions in the presence of interdependent, affiliated valuations and private budget constraints. For the sealed-bid, all-pay auction we characterize a symmetric equilibrium in continuous strategies for the case of N bidders. Budget constraints encourage more aggressive bidding among participants with large endowments and intermediate valuations. We extend our results to the war of attrition where we show that budget constraints lead to a uniform amplification of equilibrium bids among bidders with sufficient endowments. An example shows that with both interdependent valuations and private budget constraints, a revenue ranking between the two auction formats is generally not possible. Equilibria with discontinuous bidding strategies are discussed.

Suggested Citation

  • Maciej H. Kotowski & Fei Li, 2012. "On the Continuous Equilibria of Affiliated-Value, All-Pay Auctions with Private Budget Constraints, Second Version," PIER Working Paper Archive 13-043, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 05 Aug 2013.
    • Handle: RePEc:pen:papers:13-043
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    References listed on IDEAS

    as
    1. Kotowski, Maciej H., 2020. "First-price auctions with budget constraints," Theoretical Economics, Econometric Society, vol. 15(1), January.
    2. Fang, Hanming & Parreiras, Sergio O., 2002. "Equilibrium of Affiliated Value Second Price Auctions with Financially Constrained Bidders: The Two-Bidder Case," Games and Economic Behavior, Elsevier, vol. 39(2), pages 215-236, May.
    3. , & ,, 2006. "Revenue comparisons for auctions when bidders have arbitrary types," Theoretical Economics, Econometric Society, vol. 1(1), pages 95-118, March.
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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