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All-pay auction equilibria in contests

  • Alcalde, José
  • Dahm, Matthias

We analyze (non-deterministic) contests with anonymous contest success functions. There is no restriction on the number of contestants or on their valuations for the prize. We provide intuitive and easily verifiable conditions for the existence of an equilibrium with properties similar to the one of the (deterministic) all-pay auction. Since these conditions are fulfilled for a wide array of situations, the predictions of this equilibrium are very robust to the specific details of the contest. An application of this result contributes to fill a gap in the analysis of the popular Tullock rent- seeking game because it characterizes properties of an equilibrium for increasing returns to scale larger than two, for any number of contestants and in contests with or without a common value. Keywords: (non-) deterministic contest, all-pay auction, contest success functions. JEL Classification Numbers: C72 (Noncooperative Games), D72 (Economic Models of Political Processes: Rent-Seeking, Elections), D44 (Auctions).

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File URL: http://hdl.handle.net/2072/5368
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Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/5368.

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Date of creation: 2008
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Handle: RePEc:urv:wpaper:2072/5368
Contact details of provider: Postal: Avda. de la Universitat,1 - 43204 Reus (Tarragona)
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  1. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when r>2: Mixed-Strategy Equilibria and Mean Dissipation Rates," Purdue University Economics Working Papers 1039, Purdue University, Department of Economics.
  2. Baye, M. & Kovenock, D. & de Vries, C., 1990. "The All-Pay Auction with Complete Information," Discussion Paper 1990-51, Tilburg University, Center for Economic Research.
  3. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
  4. Spolaore, Enrico & Alesina, Alberto, 2006. "Conflict, Defense Spending, and the Number of Nations," Scholarly Articles 4553016, Harvard University Department of Economics.
  5. José Alcalde & Matthias Dahm, 2007. "Tullock and Hirshleifer: a meeting of the minds," Review of Economic Design, Springer, vol. 11(2), pages 101-124, September.
  6. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June.
  7. Konrad, Kai A., 2000. "Spatial contests," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 965-974, August.
  8. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-94, March.
  9. Che, Yeon-Koo & Gale, Ian, 2000. "Difference-Form Contests and the Robustness of All-Pay Auctions," Games and Economic Behavior, Elsevier, vol. 30(1), pages 22-43, January.
  10. David Malueg & Andrew Yates, 2006. "Equilibria in rent-seeking contests with homogeneous success functions," Economic Theory, Springer, vol. 27(3), pages 719-727, 04.
  11. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 27-41, January.
  12. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  13. David P. Baron & Daniel Diermeier, 2007. "Strategic Activism and Nonmarket Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 599-634, 09.
  14. Baye, M.R. & Kovenock, D., 1993. "The Solution of the Tullock Rent-Seeking Game when R > 2 : Mixed-Strategy Equilibria and Mean Dissipation Rates," Discussion Paper 1993-68, Tilburg University, Center for Economic Research.
  15. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
  16. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  17. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1994. " The Solution to the Tullock Rent-Seeking Game When R Is Greater Than 2: Mixed-Strategy Equilibria and Mean Dissipation Rates," Public Choice, Springer, vol. 81(3-4), pages 363-80, December.
  18. Konrad, Kai A., 2007. "Strategy in contests: an introduction
    [Strategie in Turnieren – eine Einführung]
    ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
  19. Perez-Castrillo, J David & Verdier, Thierry, 1992. " A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-50, April.
  20. Klumpp, Tilman & Polborn, Mattias K., 2006. "Primaries and the New Hampshire Effect," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1073-1114, August.
  21. Konrad, Kai A., 2000. "Trade contests," Journal of International Economics, Elsevier, vol. 51(2), pages 317-334, August.
  22. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
  23. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 1-26, January.
  24. 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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