IDEAS home Printed from https://ideas.repec.org/p/msm/wpaper/2012-50.html
   My bibliography  Save this paper

Service On the “Exclusion Principle” in all-pay auctions with incomplete information

Author

Listed:
  • Nicola Dimitri

    (Faculty of Economics University of Siena, Siena-Italy. Visiting Professor IMT Lucca, Lucca-Italy. Research Associate Maastricht School of Management, Maastricht-NL)

Abstract

A main issue in auction and contest design is how to attract the appropriate pool of potential bidders to enter and compete aggressively. In all-pay auctions with complete information (Baye at al, 1993 AER) formulated the so called “Exclusion Principle” showing that when the auctioneer maximizes the sum of the offers submitted by bidders, then it may be optimal for him to exclude the participants with the highest evaluations. In the paper we investigate the validity of the principle in all-pay auctions with incomplete information and, somewhat surprisingly, show that in the simplest version of such auctions findings are reversed with respect to the case of complete information. More specifically, if the auctioneer maximizes the total expected bid then he would not want to exclude participants which he may instead want to do when maximizing the highest expected price.

Suggested Citation

  • Nicola Dimitri, 2012. "Service On the “Exclusion Principle” in all-pay auctions with incomplete information," Working Papers 2012/50, Maastricht School of Management.
    • Handle: RePEc:msm:wpaper:2012/50
    as

    Download full text from publisher

    File URL: http://web2.msm.nl/RePEc/msm/wpaper/MSM-WP2012-50.pdf
    File Function: First version, 2012
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. BOS, Olivier & RANGER, Martin, 2009. "All-pay auctions with endogenous rewards," LIDAM Discussion Papers CORE 2009059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Michael R. Baye & Dan Kovenock & Casper G. Vries, 2008. "Rigging the lobbying process: An application of the all-pay auction," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 331-336, Springer.
    3. Michael R. Baye & Dan Kovenock & Casper G. Vries, 1996. "The all-pay auction with complete information," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 209-223, Springer.
    4. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521551847.
    5. Gneezy, Uri & Smorodinsky, Rann, 2006. "All-pay auctions--an experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 255-275, October.
    6. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721.
    7. Noussair, Charles & Silver, Jonathon, 2006. "Behavior in all-pay auctions with incomplete information," Games and Economic Behavior, Elsevier, vol. 55(1), pages 189-206, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    2. James Andreoni & Andy Brownback, 2014. "Grading on a Curve, and other Effects of Group Size on All-Pay Auctions," NBER Working Papers 20184, National Bureau of Economic Research, Inc.
    3. HHironori Otsubo, 2012. "Contests with Incumbency Advantages: An Experiment Investigation of the Effect of Limits on Spending Behavior and Outcome," Jena Economics Research Papers 2012-020, Friedrich-Schiller-University Jena.
    4. Emiel Maasland & Sander Onderstal, 2006. "Going, Going, Gone! A Swift Tour of Auction Theory and its Applications," De Economist, Springer, vol. 154(2), pages 197-249, June.
    5. Kimbrough, Erik O. & Laughren, Kevin & Sheremeta, Roman, 2020. "War and conflict in economics: Theories, applications, and recent trends," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 998-1013.
    6. Andreoni, James & Brownback, Andy, 2017. "All pay auctions and group size: Grading on a curve and other applications," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 361-373.
    7. Rittwik Chatterjee, 2013. "A Brief Survey of the Theory of Auction," South Asian Journal of Macroeconomics and Public Finance, , vol. 2(2), pages 169-191, December.
    8. Dietmar Fehr & Julia Schmid, 2018. "Exclusion in all‐pay auctions: An experimental investigation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(2), pages 326-339, June.
    9. Lugovskyy, Volodymyr & Puzzello, Daniela & Tucker, Steven, 2010. "An experimental investigation of overdissipation in the all pay auction," European Economic Review, Elsevier, vol. 54(8), pages 974-997, November.
    10. Parreiras, Sérgio O. & Rubinchik, Anna, 2010. "Contests with three or more heterogeneous agents," Games and Economic Behavior, Elsevier, vol. 68(2), pages 703-715, March.
    11. Christiane Ernst & Christian Thöni, 2013. "Bimodal Bidding in Experimental All-Pay Auctions," Games, MDPI, vol. 4(4), pages 1-16, October.
    12. Deck, Cary & Sheremeta, Roman M., 2019. "The tug-of-war in the laboratory," European Journal of Political Economy, Elsevier, vol. 60(C).
    13. Llorente-Saguer, Aniol & Sheremeta, Roman M. & Szech, Nora, 2023. "Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions," European Economic Review, Elsevier, vol. 154(C).
    14. Marco Scarsini & Eilon Solan & Nicolas Vieille, 2010. "Lowest Unique Bid Auctions," Papers 1007.4264, arXiv.org.
    15. Fehr, Dietmar & Schmid, Julia, 2010. "Exclusion in the all-pay auction: An experimental investigation," Discussion Papers, Research Unit: Market Behavior SP II 2010-04, WZB Berlin Social Science Center.
    16. Bettina Klose & Paul Schweinzer, 2022. "Auctioning risk: the all-pay auction under mean-variance preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(4), pages 881-916, June.
    17. Llorente-Saguer, Aniol & Sheremeta, Roman & Szech, Nora, 2016. "Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions," MPRA Paper 71202, University Library of Munich, Germany.
    18. Blake A. Allison & Jason J. Lepore & Aric P. Shafran, 2021. "Prize Scarcity And Overdissipation In All‐Pay Auctions," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 361-374, January.
    19. Hugh Ward & Peter John, 2008. "A Spatial Model of Competitive Bidding for Government Grants: Why Efficiency Gains Are Limited," Journal of Theoretical Politics, , vol. 20(1), pages 47-66, January.
    20. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:msm:wpaper:2012/50. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Maud de By (email available below). General contact details of provider: https://edirc.repec.org/data/msmmmnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.