×

On the effects of bid caps in all-pay auctions. (English) Zbl 1411.91252

Summary: This paper analyzes the effects of a bid cap in an all-pay auction with incomplete information. I find that a non-trivial bid cap affects an agent’s expected payment in three ways: An “anti-competition effect” which is associated with this agent’s own signal, a pro-competitive “good news effect” which is associated with her opponents’ signals and which alleviates the winner’s curse, and an “inference effect” caused by affiliation of signals. Unlike the former two effects, the “inference effect” is a double-edged sword. It is anti-competitive when the cap is relatively low and pro-competitive when a cap is relatively high.

MSC:

91B26 Auctions, bargaining, bidding and selling, and other market models
PDFBibTeX XMLCite
Full Text: DOI

References:

[1] Che, Y.; Gale, I. L., Caps on political lobbying: reply, Amer. Econ. Rev., 96, 4, 1355-1360 (2006)
[2] Szech, N., Tie-breaks and bid-caps in all-pay auctions, Games Econom. Behav., 92, 138-149 (2015) · Zbl 1318.91104
[3] Gavious, A.; Moldovanu, B.; Sela, A., Bid costs and endogenous bid caps, Rand J. Econ., 709-722 (2002)
[4] Olszewski, W.; Siegel, R., Bid caps in large contestsTechnical report (2017), mimeo
[5] Kaplan, T. R.; Wettstein, D., Caps on political lobbying: Comment, Amer. Econ. Rev., 96, 4, 1351-1354 (2006)
[6] Einy, E.; Haimanko, O.; Orzach, R.; Sela, A., Common-value all-pay auctions with asymmetric information and bid caps, Internat. J. Game Theory, 45, 1-2, 63-88 (2016) · Zbl 1388.91103
[7] Bulow, J.; Klemperer, P., Prices and the winner’s curse, Rand J. Econ., 1-21 (2002)
[8] Harstad, R.; Bordley, R., Lottery qualification auctions, Adv. Appl. Microecon., 6, 157-183 (1996)
[9] Parlour, C. A.; Rajan, U., Rationing in IPOs, Review Finance, 9, 1, 33-63 (2005) · Zbl 1125.91332
[10] Chen, B.; Jiang, X.; Knyazev, D., On disclosure policies in all-pay auctions with stochastic entry, J. Math. Econom., 70, 66-73 (2017) · Zbl 1395.91220
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.