Article ID Journal Published Year Pages File Type
5071589 Games and Economic Behavior 2015 12 Pages PDF
Abstract
We revisit the two bidder complete information all-pay auction with bid-caps introduced by Che and Gale (1998), dropping their assumption that tie-breaking must be symmetric. Any choice of tie-breaking rule leads to a different set of Nash equilibria. Compared to the optimal bid-cap of Che and Gale we obtain that in order to maximize the sum of bids, the designer prefers to set a less restrictive bid-cap combined with a tie-breaking rule which slightly favors the weaker bidder. Moreover, the designer is better off breaking ties deterministically in favor of the weak bidder than symmetrically.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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