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Contests with small noise and the robustness of the all-pay auction


Ewerhart, Christian (2017). Contests with small noise and the robustness of the all-pay auction. Working paper series / Department of Economics 186, University of Zurich.

Abstract

This paper considers all-pay contests in which the relationship between bids and allocations reflects a small amount of noise. Prior work had focused on one particular equilibrium. However, there may be other equilibria. To address this issue, we introduce a new and intuitive measure for the proximity to the all-pay auction. This allows, in particular, to provide simple conditions under which actually any equilibrium of the contest is both payoff equivalent and revenue equivalent to the unique equilibrium of the corresponding all-pay auction. The results are shown to have powerful implications for monopoly licensing, political lobbying, electoral competition, optimally biased contests, the empirical analysis of rent-seeking, and dynamic contests.

Abstract

This paper considers all-pay contests in which the relationship between bids and allocations reflects a small amount of noise. Prior work had focused on one particular equilibrium. However, there may be other equilibria. To address this issue, we introduce a new and intuitive measure for the proximity to the all-pay auction. This allows, in particular, to provide simple conditions under which actually any equilibrium of the contest is both payoff equivalent and revenue equivalent to the unique equilibrium of the corresponding all-pay auction. The results are shown to have powerful implications for monopoly licensing, political lobbying, electoral competition, optimally biased contests, the empirical analysis of rent-seeking, and dynamic contests.

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4 citations in Microsoft Academic

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C72, D45, D72, L12
Uncontrolled Keywords:Contests, increasing returns, mixed-strategy Nash equilibrium, robustness of the all-pay auction, payoff equivalence, revenue equivalence
Language:English
Date:June 2017
Deposited On:28 Jan 2015 10:33
Last Modified:19 Mar 2018 07:46
Series Name:Working paper series / Department of Economics
Number of Pages:38
ISSN:1664-7041
Additional Information:Revised version ; Former title: "Rent-seeking games and the all-pay auction"
OA Status:Green
Official URL:http://www.econ.uzh.ch/static/wp/econwp186.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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