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All-pay auctions: Implementation and optimality


Jönsson, Stefan; Schmutzler, Armin (2013). All-pay auctions: Implementation and optimality. Working paper series / Department of Economics 108, University of Zurich.

Abstract

This paper analyzes how all-pay auctions with endogenous prizes can be used to provide effort incentives. We show that wide classes of effort distributions can be implemented as equilibrium outcomes of such games. We also ask how all-pay auctions have to be structured so as to induce high expected highest efforts without generating excessive wasteful efforts of losers. All-pay auctions with endogenous prizes can do better than all-pay auctions with fixed prizes in this respect, in particular, when the prize function is approximately linear. We use the results to compare patents and prizes as innovation incentives, and to explore promotion incentives in organizations.

Abstract

This paper analyzes how all-pay auctions with endogenous prizes can be used to provide effort incentives. We show that wide classes of effort distributions can be implemented as equilibrium outcomes of such games. We also ask how all-pay auctions have to be structured so as to induce high expected highest efforts without generating excessive wasteful efforts of losers. All-pay auctions with endogenous prizes can do better than all-pay auctions with fixed prizes in this respect, in particular, when the prize function is approximately linear. We use the results to compare patents and prizes as innovation incentives, and to explore promotion incentives in organizations.

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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:D44, D43, D02
Uncontrolled Keywords:Contests, all-pay auctions, endogenous prizes, implementation
Language:English
Date:January 2013
Deposited On:23 Jan 2013 11:51
Last Modified:13 Aug 2017 22:48
Series Name:Working paper series / Department of Economics
Number of Pages:44
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp108.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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