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Silent interests and all-pay auctions
[Verborgene Interessen und "All-Pay" Auktionen Befinden sich Firmen im Wettkampf in "All-Pay" Auktionen]

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  • Konrad, Kai Andreas

Abstract

If firms compete in all-pay auctions with complete information, silent shareholdings introduce asymmetric externalities into the all-pay auction framework. If the strongest firm owns a large share in the second strongest firm, this may make the strongest firm abstain from bidding. As a consequence, equilibrium profits of both firms may increase, but the prize may be allocated less efficiently. The reverse ownership structure is also likely to increase the profits of the firms involved in the ownership relationship but without these negative efficiency effects.

Suggested Citation

  • Konrad, Kai Andreas, 2005. "Silent interests and all-pay auctions
    [Verborgene Interessen und "All-Pay" Auktionen Befinden sich Firmen im Wettkampf in "All-Pay" Auktionen]
    ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2005-10, Social Science Research Center Berlin (WZB).
  • Handle: RePEc:zbw:wzbmpg:spii200510
    as

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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Frode Meland & Odd Straume, 2007. "Outsourcing in contests," Public Choice, Springer, vol. 131(3), pages 315-331, June.
    2. Bettina Klose & Dan Kovenock, 2015. "The all-pay auction with complete information and identity-dependent externalities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(1), pages 1-19, May.
    3. Cohen, Chen & Sela, Aner, 2008. "Allocation of prizes in asymmetric all-pay auctions," European Journal of Political Economy, Elsevier, vol. 24(1), pages 123-132, March.
    4. Aner Sela, 2012. "Sequential two-prize contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(2), pages 383-395, October.
    5. Sela, Aner, 2008. "Sequential Two-Prize Contests," CEPR Discussion Papers 6769, C.E.P.R. Discussion Papers.
    6. Bettina Klose & Dan Kovenock, 2015. "Extremism drives out moderation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(4), pages 861-887, April.
    7. Martin Gonzalez Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," Working Papers 72, Universidad de San Andres, Departamento de Economia, revised Jun 2004.
    8. 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).
    9. Jia, Hao & Skaperdas, Stergios & Vaidya, Samarth, 2013. "Contest functions: Theoretical foundations and issues in estimation," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 211-222.
    10. Aner Sela, 2008. "Sequential Two-Prize Contests," Working Papers 0803, Ben-Gurion University of the Negev, Department of Economics.
    11. Andrea Fosfuri & Thomas Rønde, 2009. "Leveraging Resistance to Change and the Skunk Works Model of Innovation," Post-Print hal-00699208, HAL.
    12. Fu, Qiang & Lu, Jingfeng, 2013. "Competitive effect of cross-shareholdings in all-pay auctions with complete information," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 267-277.
    13. Fosfuri, Andrea & Rønde, Thomas, 2009. "Leveraging resistance to change and the skunk works model of innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 274-289, October.
    14. Metzger, Lars Peter, 2014. "Invader strategies in the war of attrition with private information," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 160-166.
    15. Lu, Jingfeng, 2012. "Optimal auctions with asymmetric financial externalities," Games and Economic Behavior, Elsevier, vol. 74(2), pages 561-575.

    More about this item

    Keywords

    All-pay auctions; externalities; contests; silent minority shareholdings ¸ownership structure;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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