All-Pay Auctions with Polynomial Rewards

Bos, Olivier and Ranger, Martin (2013): All-Pay Auctions with Polynomial Rewards.

Abstract

This paper examines a perfectly discriminating contest (all-pay auction) with two asymmetric players. We focus on unordered valuations. Valuations are endogenous (polynomial functions) and depend on the effort each player invests in the contest. The shape of the valuation function is common knowledge and differs between the contestants. Some key properties of R&D races, lobbying activity and sport contests are captured by this framework. After analyzing the unique mixed strategy equilibrium, we derive a closed form of the expected expenditure of both players. We characterize the expected expenditure by means of incomplete Beta functions.

• Item Type: MPRA Paper
• Language: English
• Keywords: All-pay auctions, contests
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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