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Overview

Overview. All-pay Auctions: Complete Information: Characterization of the set of NE Baye, Kovenock, and De Vries (ET, 1996) Hillman and Samet (PC, 1987) Hillman and Riley (EP, 1989) Exclusion principle Baye, Kovenock, and De Vries (AER, 1993) Caps Che and Gale ( AER, 1998)

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Overview

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  1. Overview All-pay Auctions: Complete Information: • Characterization of the set of NE Baye, Kovenock, and De Vries (ET, 1996) Hillman and Samet (PC, 1987) Hillman and Riley (EP, 1989) • Exclusion principle Baye, Kovenock, and De Vries (AER, 1993) • Caps Che and Gale (AER, 1998) All-pay Auctions: (In)Complete Information: • Banning bidders from all-pay auctions Menicucci (ET,2006)

  2. All-pay Auctions: (In)Complete Information Menicucci (Economic Theory,2006): “Banning bidders from all-pay auctions”

  3. Menicucci (2006) • All-pay auction with complete information among the bidders • The seller does not observe the bidders’ values

  4. Main Result: • It might be profitable to exclude from the auction all but two (randomly selected)

  5. The Model • n > 2 risk-neutral bidders • All-pay auction • Values (v1, …, vn ) is common knowledge among bidders • The seller does not observe (v1, …, vn ) and regards vi as the realization of a random variable with binary support

  6. The Model • Stage 1: the seller selects the finalists, set M with cardinality m • Stage 2: each bidder from the set M participates in the all-pay auction

  7. The Model • mH is the number of bidder in set M with valuation vH 0 <= mH <= m

  8. Results: case mH = 0

  9. Results: case mH = 1

  10. Results: case mH >= 2

  11. Results

  12. The Seller • Probabilities for the three cases:

  13. The Seller • The expected payoff for different m:

  14. The Seller: Intuition • The expected payoff for different m:

  15. Results

  16. General Case

  17. All-Pay Auctions vs Lotteries

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