All-Pay Auctions with Negative Prize Externalities: Theory and Experimental Evidence

Dario Sacco () and Armin Schmutzler
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Dario Sacco: Socioeconomic Institute, University of Zurich

No 806, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: The paper characterizes the mixed-strategy equilibria in all-pay auctions with endogenous prizes that depend positively on own effort and negatively on the effort of competitors. Such auctions arise naturally in the context of investment games, lobbying games, and promotion tournaments. We also provide an experimental analysis of a special case which captures the strategic situation of a two-stage game with investment preceding homogenous Bertrand competition. We obtain overinvestment both relative to the mixed-strategy equilibrium and the social optimum.

Keywords: All-pay auctions; oligopoly; investment; experiment; overbidding (search for similar items in EconPapers)
JEL-codes: C92 D44 L13 O31 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2008-05
New Economics Papers: this item is included in nep-exp, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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https://www.zora.uzh.ch/id/eprint/52393/1/wp0806.pdf first version, 2008 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0806

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