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The all-pay auction with complete information (*)

Author

Listed:
  • Dan Kovenock

    (Department of Economics, Purdue University, West Lafayette, IN 47907, USA)

  • Michael R. Baye

    (Department of Economics, The Pennsylvania State University, State College, PA 16803, USA)

  • Casper G. de Vries

    (Tinbergen Institute, P.O. Box 1738, 3000 DR Rotterdam, THE NETHERLANDS)

Abstract

In a (first price) all-pay auction, bidders simultaneously submit bids for an item. All players forfeit their bids, and the high bidder receives the item. This auction is widely used in economics to model rent seeking, R&D races, political contests, and job promotion tournaments. We fully characterize equilibrium for this class of games, and show that the set of equilibria is much larger than has been recognized in the literature. When there are more than two players, for instance, we show that even when the auction is symmetric there exists a continuum of asymmetric equilibria. Moreover, for economically important configurations of valuations, there is no revenue equivalence across the equilibria; asymmetric equilibria imply higher expected revenues than the symmetric equilibrium.

Suggested Citation

  • Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 291-305.
    • Handle: RePEc:spr:joecth:v:8:y:1996:i:2:p:291-305
    Note: Received:July 15, 1994; revised version July 3, 1995
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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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