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The all-pay auction with non-monotonic payoff

  • Subhashish Modak Chowdhury

    (University of East Anglia)

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    We analyze an endogenous prize all-pay auction under complete information where it is possible that none of the bidders wins and the winning payoff becomes non-monotonic in own bid. We derive the conditions for the existence of pure strategy equilibria and fully characterize the unique mixed strategy equilibrium when pure strategy equilibria do not exist. The high-valuation bidder places two distinct mass points in his equilibrium mixed strategy and the equilibrium support of the low-valuation bidder is not continuous. Under common valuation, in the equilibrium mixed strategy both bidders place mass points at the same point of the support. Possible applications are discussed.

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    Paper provided by School of Economics, University of East Anglia, Norwich, UK. in its series Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) with number 09-09.

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    Date of creation: 01 Dec 2009
    Date of revision:
    Handle: RePEc:uea:wcbess:09-09
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    1. Amegashie, J. Atsu, 2001. "An all-pay auction with a pure-strategy equilibrium," Economics Letters, Elsevier, vol. 70(1), pages 79-82, January.
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    11. Bertoletti, Paolo, 2006. "On the reserve price in all-pay auctions with complete information and lobbying games," MPRA Paper 1083, University Library of Munich, Germany.
    12. Kaplan, T.R. & Luski, I. & Wettstein, D., 2000. "Innovative Activity and Sunk Cost," Discussion Papers 0006, Exeter University, Department of Economics.
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    15. Wakelin, Katharine, 2001. "Productivity growth and R&D expenditure in UK manufacturing firms," Research Policy, Elsevier, vol. 30(7), pages 1079-1090, August.
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    18. Tullock, Gordon, 1997. " Where Is the Rectangle?," Public Choice, Springer, vol. 91(2), pages 149-59, April.
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