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Elastic contests and the robustness of the all-pay auction


Ewerhart, Christian (2014). Elastic contests and the robustness of the all-pay auction. Working paper series / Department of Economics 155, University of Zurich.

Abstract

This paper studies a large class of imperfectly discriminating contests, referred to as elastic contests, that induce players to either overbid a standing bid or to abstain from bidding altogether. Many common forms of contest are elastic. In any equilibrium of an elastic contest, there is complete rent dissipation for all but at most one player. This result is used to show that in any suffciently decisive anonymous standard contest, any equilibrium is an all-pay auction equilibrium. Thus, the analysis offers strong support for the robustness of the all-pay auction. The approach also delivers definite answers regarding the extent of rent dissipation in Tullock contests with intermediate values of the decisiveness parameter.

Abstract

This paper studies a large class of imperfectly discriminating contests, referred to as elastic contests, that induce players to either overbid a standing bid or to abstain from bidding altogether. Many common forms of contest are elastic. In any equilibrium of an elastic contest, there is complete rent dissipation for all but at most one player. This result is used to show that in any suffciently decisive anonymous standard contest, any equilibrium is an all-pay auction equilibrium. Thus, the analysis offers strong support for the robustness of the all-pay auction. The approach also delivers definite answers regarding the extent of rent dissipation in Tullock contests with intermediate values of the decisiveness parameter.

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1 citation 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, all-pay auction, rent-seeking, mixed Nash equilibrium, rent dissipation
Language:English
Date:May 2014
Deposited On:08 May 2014 09:02
Last Modified:14 Feb 2018 21:14
Series Name:Working paper series / Department of Economics
Number of Pages:43
ISSN:1664-7041
OA Status:Green
Official URL:http://www.econ.uzh.ch/static/wp/econwp155.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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