Tie-breaks and bid-caps in all-pay auctions

Nora Szech

Games and Economic Behavior, 2015, vol. 92, issue C, 138-149

Abstract: We revisit the two bidder complete information all-pay auction with bid-caps introduced by Che and Gale (1998), dropping their assumption that tie-breaking must be symmetric. Any choice of tie-breaking rule leads to a different set of Nash equilibria. Compared to the optimal bid-cap of Che and Gale we obtain that in order to maximize the sum of bids, the designer prefers to set a less restrictive bid-cap combined with a tie-breaking rule which slightly favors the weaker bidder. Moreover, the designer is better off breaking ties deterministically in favor of the weak bidder than symmetrically.

Keywords: All-pay auctions; Contests; Bid-caps; Tie-breaking; Lobbying (search for similar items in EconPapers)
JEL-codes: D44 D72 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:92:y:2015:i:c:p:138-149

DOI: 10.1016/j.geb.2015.05.008

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