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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. Games and Economic Behavior, (105):195of print-211.

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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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Contests; increasing returns; mixed-strategy Nash equilibrium; robustness of the all-pay auction; payoff equivalence; revenue equivalence
Language:English
Date:September 2017
Deposited On:22 Aug 2017 12:24
Last Modified:22 Aug 2017 12:24
Publisher:Elsevier
ISSN:0899-8256
Additional Information:Für diese Publikation hat Christian Ewerhart Open Access beantragt
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1016/j.geb.2017.07.003
Related URLs:http://www.sciencedirect.com/science/article/pii/S0899825617301185

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