Silent Interests and All-Pay Auctions

30 Pages Posted: 18 May 2005

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Date Written: May 2005

Abstract

If firms compete in all-pay auctions with complete information, silent shareholdings introduce asymmetric externalities into the all-pay auction framework. If the strongest firm owns a large share in the second strongest firm, this may make the strongest firm abstain from bidding. As a consequence, equilibrium profits of both firms may increase, but the prize may be allocated less efficiently. The reverse ownership structure is also likely to increase the profits of the firms involved in the ownership relationship but without these negative efficiency effects.

Keywords: All-pay auctions, externalities, contests, silent minority shareholdings, ownership structure

JEL Classification: D44, L11, L41

Suggested Citation

Konrad, Kai A., Silent Interests and All-Pay Auctions (May 2005). CESifo Working Paper Series No. 1473; WZB, Markets and Political Economy Working Paper No. SP II 2005-10, Available at SSRN: https://ssrn.com/abstract=722468

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

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Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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IZA Institute of Labor Economics

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