All-Pay Auctions with Reserve Price and Bid Cap

Oleg Muratov

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: I study the joint effects of the reserve price and the bid cap in the all-pay auction. I show that in equilibrium bidding, there are: (i) atoms at 0, the reserve price, and the bid cap; and (ii) continuous bidding above the reserve. If the valuations are high enough, the range for continuous bidding vanishes entirely. Further, I characterize environments with multiple equilibria and derive settings with the following features: with two players, the player with the lower valuation can have a positive rent; with three players, active competition for a single prize is possible with totally asymmetric valuations; in both cases, the value of the positive payoff for the winner can vary across different equilibria.

Date: 2021-04
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
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