Ambiguity aversion in the all‐pay auction and war of attrition

Steven Stong

Journal of Public Economic Theory, 2018, vol. 20, issue 6, 822-839

Abstract: Ambiguity aversion is introduced to a class of commonly applied games including the war of attrition and all‐pay auction. In contrast to subjective expected utility, the all‐pay auction is shown to generate less expected expenditure than the first‐price auction. The war of attrition generates less expected expenditure than the all‐pay auction and second‐price auction. In the all‐pay auction, increasing ambiguity causes low types to bid lower and high types to bid higher. In the war of attrition, ambiguity can decrease the bids for all types.

Date: 2018
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