All-Pay Auctions with Variable Rewards
Paper number: 01/09
Paper date: Decemeber 20, 2001
Paper Category: Working Paper
Todd R. Kaplan, Israel Luski, Aner Sela and David Wettstein
We study all-pay auctions with variable rewards under incomplete information. In standard models, a reward depends on a bidder's privately known type; however, in our model it is also a function of his bid. We show that in such models there is a potential for paradoxical behavior where a reduction in the rewards or an increase in costs may increase the expected sum of bids or alternatively the expected highest bid.