All-Pay Auctions: Implementation and Optimality

45 Pages Posted: 31 Jan 2013

See all articles by Stefan Jönsson

Stefan Jönsson

University of Zurich - Department of Economics

Armin Schmutzler

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2013

Abstract

This paper analyzes how all-pay auctions with endogenous prizes can be used to provide effort incentives. We show that wide classes of effort distributions can be implemented as equilibrium outcomes of such games. We also ask how all-pay auctions have to be structured so as to induce high expected highest efforts without generating excessive wasteful efforts of losers. All-pay auctions with endogenous prizes can do better than all-pay auctions with fixed prizes in this respect, in particular, when the prize function is approximately linear. We use the results to compare patents and prizes as innovation incentives, and to explore promotion incentives in organizations.

Keywords: Contests, all-pay auctions, endogenous prizes, implementation

JEL Classification: D44, D43, D02

Suggested Citation

Jönsson, Stefan and Schmutzler, Armin, All-Pay Auctions: Implementation and Optimality (January 1, 2013). Available at SSRN: https://ssrn.com/abstract=2205697 or http://dx.doi.org/10.2139/ssrn.2205697

Stefan Jönsson (Contact Author)

University of Zurich - Department of Economics ( email )

Zürich, CH-8006
Switzerland

Armin Schmutzler

University of Zurich - Department of Economics ( email )

Zürich, CH-8006
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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