An analysis of the two-bidder all-pay auction with common values

Chang Koo Chi

No 17/2018, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: This paper studies a symmetric two-bidder all-pay auction where the bidders compete for a prize whose unknown common value is either high or low. The bidders’ private signals (or types) are discrete and affiliated through the value. Even with Affiliated signals, monotonicity of equilibria can fail in the sense that the bidder With a higher signal does not always win the auction. I show that when monotonicity fails, there exist multiple symmetric equilibria but the bidder’s type-dependent payoff is invariant across the equilibria. The paper provides a closed-form formula for the equilibrium payoffs and a condition for rent dissipation.

Keywords: All-pay auctions; common values; correlated signals; non-monotone equilibria; rent dissipation rent dissipation (search for similar items in EconPapers)
JEL-codes: D44 D72 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2018-08-28
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
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