Abstract

http://ssrn.com/abstract=319241
 
 

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When Bidding More is Not Enough: All-Pay Auctions with Handicaps


Markus Walzl


RWTH Aachen University - Chair for Economics (Microeconomics)

Eberhard Feess


Frankfurt School of Finance & Management gemeinnützige GmbH

Gerd Muehlheusser


University of Hamburg; Institute for the Study of Labor (IZA)

June 2002

Bonn Econ. Discussion Paper No. 14/2002

Abstract:     
We consider a standard two-player all-pay auction with private values, where the valuation for the object is private information to each bidder. The crucial feature is that one bidder is favored by the allocation rule in the sense that he need not bid as much as the other bidder to win the auction. Analogously, the other bidder is handicapped by the rule as overbidding the rival may not be enough to win the auction. Clearly, this has important implications on equilibrium behavior. We fully characterize the equilibrium strategies for this auction format and show that there exists a unique pure strategy Bayesian Nash Equilibrium.

Number of Pages in PDF File: 23

Keywords: All-pay auction, contest, asymmetric allocation rule, rent-seeking, asymmetric information

JEL Classification: D44, D88

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Date posted: August 21, 2002  

Suggested Citation

Walzl, Markus and Feess, Eberhard and Muehlheusser, Gerd, When Bidding More is Not Enough: All-Pay Auctions with Handicaps (June 2002). Bonn Econ. Discussion Paper No. 14/2002. Available at SSRN: http://ssrn.com/abstract=319241 or http://dx.doi.org/10.2139/ssrn.319241

Contact Information

Markus Walzl (Contact Author)
RWTH Aachen University - Chair for Economics (Microeconomics) ( email )
Aachen, 52056
Germany
0049 241 809 6157 (Phone)
0049 241 809 2345 (Fax)
Eberhard Feess
Frankfurt School of Finance & Management gemeinnützige GmbH ( email )
Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany
Gerd Muehlheusser
University of Hamburg ( email )
Von Melle Park 5
Hamburg, 20146
Germany
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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