'On the Continuous Equilibria of Affiliated-Value, All-Pay Auctions with Private Budget Constraints', Third Version
Games and Economic Behavior, Volume 85, May 2014, Pages 84–108
58 Pages Posted: 16 Jan 2014 Last revised: 20 May 2014
Date Written: January 10, 2014
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. 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 endowments. An example shows that with both interdependent valuations and private budget constraints, a revenue ranking between the two auction formats is generally not possible. Equilibria with discontinuous bidding strategies are discussed.
Keywords: All-Pay Auction, War of Attrition, Budget Constraints, Common Values, Private Values, Affiliation, Contests
JEL Classification: D44
Suggested Citation: Suggested Citation