Common-Value All-Pay Auctions with Asymmetric Information and Bid Caps

Ezra Einy (), Ori Haimanko (), Ram Orzach () and Aner Sela
Additional contact information
Ezra Einy: BGU
Ram Orzach: Oakland University, USA

No 1402, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: We study two-player common-value all-pay auctions (contests) with asymmetric information under the assumption that one of the players has an information advantage over his opponent and both players are budget-constrained. We generalize the results for all-pay auctions with complete information, and show that in all-pay auctions with asymmetric information, sufficiently high (but still binding) bid caps do not change the players' expected total effort compared to the benchmark auction without any bid cap. Furthermore, we show that there are bid caps that increase the players' expected total effort compared to the benchmark. Finally, we demonstrate that there are bid caps which may have an unanticipated effect on the players' expected payoffs - one player's information advantage may turn into a disadvantage as far as his equilibrium payoff is concerned.

Keywords: Common-value all-pay auctions; asymmetric information; information advantage; bid caps. (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Common-Value All-Pay Auctions with Asymmetric Information and Bid Caps (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:1402

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