On the Continuous Equilibria of Affiliated-Value, All-Pay Auctions with Private Budget Constraints
Maciej H. Kotowski
Harvard University - Harvard Kennedy School (HKS)
University of North Carolina (UNC) at Chapel Hill
April 23, 2012
PIER Working Paper No. 12-019
We consider all-pay auctions in the presence of interdependent, affiliated valuations and private budget constraints. For the sealed-bid, all-pay auction we characterize a symmetric equilibrium in continuous strategies for the case of N bidders and we investigate its properties. Budget constraints encourage more aggressive bidding among participants with large endowments and intermediate valuations. We extend our results to the war of attrition where we show that budget constraints lead to a uniform amplification of equilibrium bids among bidders with sufficient endownments. An example shows that with both interdependent valuations and private budget constraints, a revenue ranking between the two mechanisms is generally not possible.
Number of Pages in PDF File: 44
Keywords: All-Pay Auction, War of Attrition, Budget Constraints, Common Values, Private Values, Affiliation, Contests
JEL Classification: D44
Date posted: May 7, 2012
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