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Bidding behavior in a symmetric Chinese auction

Author

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  • Mauricio Benegas

    (CAEN/UFC, Brazil)

Abstract

This paper purposes a symmetric all-pay auction where the bidders compete neither for an object nor the object itself but for a lottery on receive. That lottery is determined endogenously through the bids. This auction is known as chance auction or more popularly as Chinese auction. The model considers the possibility that for some bidders the optimal strategy is to bid zero and to rely on luck. It showed that bidders become less aggressive when the lottery satisfies a variational condition. It was also shown that luck factor is decisive to determine if the expected payoff in Chinese auction is bigger or smaller than expected payoff in standard all-pay auction

Suggested Citation

  • Mauricio Benegas, 2015. "Bidding behavior in a symmetric Chinese auction," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 16(1), pages 93-110.
    • Handle: RePEc:anp:econom:v:16:y:2015:1:93_110
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    More about this item

    Keywords

    Chinese auction; All-pay auction; Lottery; Bayesian equilibrium;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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