The All-Pay Auction When a Committee Awards the Prize

J. Atsu Amegashie

Public Choice, 2003, vol. 116, issue 1-2, 79-90

Abstract: There is very little work on the equilibrium of the all-pay auction when the prize is awarded by two or more people. I consider an all-pay auction under committee administration with caps on the bids of the contestants. I show that for any number of committee members and contestants, there exists a pure-strategy equilibrium in which the contestants bid an amount equal to a suitably chosen cap. I argue that the cap is not an artificial restriction on the game, given that there are caps on political lobbying in the real world. I find that committee administration could result in higher aggregate expenditures, even if there is some probability that the committee will not award the prize. The intuition for this result is that the inclusion of additional administrators relaxes the effect of caps on lobbying. That is, caps on lobbying tend to be more effective the smaller is the size of the committee. Caps may also be a solution to the problem of majoritarian cycles in all-pay auctions under committee administration. Copyright 2003 by Kluwer Academic Publishers

Date: 2003
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