All-pay auctions with certain and uncertain prizes

Aner Sela and Yizhaq Minchuk

No 9908, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study all-pay auctions with multiple prizes. The players have the same value for all the certain prizes except for one uncertain prize for which each player has a private value. We characterize the equilibrium strategy and show that if the number of prizes is smaller than the number of players, independent of the ranking of the uncertain prize, a player's probability to win as well as his expected utility increases in his value for this prize. We demonstrate that a stochastic dominance relation between two distribution functions of the players' private values may increase but also even decrease the players' ex-ante expected utility as well the players' expected total effort. Also, increasing the number of prizes may decrease the players' ex-ante expected utility. Thus, we may conclude that a larger number of prizes does not necessarily benefit the players in a contest.

Keywords: All-pay auctions; Contests; Uncertain prizes (search for similar items in EconPapers)
JEL-codes: D44 D82 J31 J41 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-cta, nep-gth, nep-mic and nep-upt
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