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On the reserve price in all-pay auctions with complete information and lobbying games

  • Bertoletti, Paolo

We show that the seller’s optimal reserve price in an all-pay auction with complete information is higher than in a standard auction. We use our results to re-consider some findings of the literature that models lobbying games as all-pay auctions. In particular, we show that the so-called Exclusion Principle appears to rely crucially on the implicit assumption of a “weak” (in terms of bargaining power) seller, and does not hold if she regards bidders’ valuations as iid according to a monotonic hazard rate. Our preliminary results for the case of independent but asymmetric bidders make it even more suspicious.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1083.

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Date of creation: Jan 2006
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Handle: RePEc:pra:mprapa:1083
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  1. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
  2. Richard T. Boylan, 2000. "An optimal auction perspective on lobbying," Social Choice and Welfare, Springer, vol. 17(1), pages 55-68.
  3. Kovenock, D. & de Vries, C.G., 1995. "The All-Pay Auction with Complete Information," UFAE and IAE Working Papers 311.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  4. Domenico Menicucci, 2006. "Banning Bidders from All-pay Auctions," Economic Theory, Springer, vol. 29(1), pages 89-94, September.
  5. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
  6. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1, March.
  7. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June.
  8. 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.
  9. Bertoletti, Paolo, 2006. "A note on the Exclusion Principle," MPRA Paper 1085, University Library of Munich, Germany.
  10. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
  11. Fang, Hanming, 2002. " Lottery versus All-Pay Auction Models of Lobbying," Public Choice, Springer, vol. 112(3-4), pages 351-71, September.
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