44 Pages Posted: 7 May 2012
Date Written: April 23, 2012
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.
Keywords: All-Pay Auction, War of Attrition, Budget Constraints, Common Values, Private Values, Affiliation, Contests
JEL Classification: D44
Suggested Citation: Suggested Citation
Kotowski, Maciej H. and Li, Fei, On the Continuous Equilibria of Affiliated-Value, All-Pay Auctions with Private Budget Constraints (April 23, 2012). PIER Working Paper No. 12-019. Available at SSRN: https://ssrn.com/abstract=2053311 or http://dx.doi.org/10.2139/ssrn.2053311