All-Pay Auctions with Endogenous Rewards

Olivier Bos and Martin Ranger

No 46, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: This paper examines a perfectly discriminating contest (all-pay auction) with two asymmetric players. Valuations are endogenous 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. Once the unique equilibrium in mixed strategies analyzed, we derive a closed form of the expected expenditure of both players. We characterize the expected expenditure by means of incomplete Beta functions. We focus on unordered valuations.

Keywords: All-pay auctions; contests (search for similar items in EconPapers)
JEL-codes: D44 D72 (search for similar items in EconPapers)
Date: 2010-02-23
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Related works:
Working Paper: All-pay auctions with endogenous rewards (2009)
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