Second-Price All-Pay Auctions and Best-Reply Matching Equilibria

Gisèle Umbhauer ()
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Gisèle Umbhauer: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique

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Abstract: The paper studies second-price all-pay auctions - wars of attrition - in a new way, based on classroom experiments and Kosfeld et al.'s best-reply matching equilibrium. Two players fight over a prize of value V, and submit bids not exceeding a budget M; both pay the lowest bid and the prize goes to the highest bidder. The behavior probability distributions in the classroom experiments are strikingly different from the mixed Nash equilibrium. They fit with best-reply matching and generalized best-reply matching, an ordinal logic according to which, if bid A is the best response to bid B, then A is played as often as B. The paper goes into the generalized best-reply matching logic, highlights the role of focal values and discusses the high or low payoffs this logic can lead to.

Keywords: Second-price all-pay auction; War of attrition; Best-reply matching; Nash equilibrium; Classroom experiment (search for similar items in EconPapers)
Date: 2019
Note: View the original document on HAL open archive server: https://hal.science/hal-03164468v1
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Published in International Game Theory Review, 2019, 21 (02), pp.40. ⟨10.1142/S0219198919400097⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03164468

DOI: 10.1142/S0219198919400097

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