Ambiguity aversion in the all‐pay auction and war of attrition

Stong, Steven

doi:10.1111/jpet.12345

Cited by 4 publications

(2 citation statements)

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“…Alternatively, one can directly verify that expression (18) is the equilibrium bidding strategy in the all-pay auction(Stong, 2018).…”

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confidence: 99%

Auction design with ambiguity: Optimality of the first-price and all-pay auctions

Baik¹,

Hwang²

2021

Preprint

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We study the optimal auction design problem when bidders' preferences follow the maxmin expected utility model. We suppose that each bidder's set of priors consists of beliefs close to the seller's belief, where "closeness" is defined by a divergence. For a given allocation rule, we identify a class of optimal transfer candidates, named the win-lose dependent transfers, with the following property: each type of bidder's transfer conditional on winning or losing is independent of the competitor's type report. Our result reduces the infinitedimensional optimal transfer problem to a two-dimensional optimization problem. By solving the reduced problem, we find that: (i) among efficient mechanisms with no premiums for losers, the first-price auction is optimal; and, (ii) among efficient winner-favored mechanisms where each bidder pays smaller amounts when she wins than loses: the all-pay auction is optimal. Under a simplifying assumption, these two auctions remain optimal under the endogenous allocation rule.

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“…Alternatively, one can directly verify that expression (18) is the equilibrium bidding strategy in the all-pay auction(Stong, 2018).…”

mentioning

confidence: 99%

Auction design with ambiguity: Optimality of the first-price and all-pay auctions

Baik¹,

Hwang²

2021

Preprint

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“…In the contest literature where there is no public-good provision, Cornes and Hartley (2012) provide a general framework for analyzing an equilibrium given heterogeneous risk-averse players. Beyond risk aversion, Treich (2010) and Jindapon and Whaley (2015) explore the effects of downside risk aversion in contests while Kelsey and Melkonyan (2018) and Stong (2018) focus on ambiguity aversion.…”

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confidence: 99%

Free riders and the optimal prize in public‐good funding lotteries

Jindapon

Yang

2020

J Public Economic Theory

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We prove the existence and uniqueness of an equilibrium in a game where players, whose preferences exhibit constant absolute risk aversion or constant relative risk aversion, contribute to a public good via lottery‐ticket purchases. Contrasting models with risk neutrality, we show that an equilibrium with a strictly positive amount of the public good may not exist without a sufficient number of participants who are not too risk‐averse. We show that players who are more risk‐averse purchase fewer lottery tickets and are more likely to free ride in equilibrium. In fact, it is possible for free riders to place a larger value on the public good than do those who contribute. In a symmetric equilibrium, we show that an upper bound exists for the amount of the public good, even though there are infinitely many participants. Furthermore, we derive a lottery prize that maximizes the amount of the public good in a symmetric equilibrium and find that such a prize always results in an overprovision of the public good.

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Dual auctions for assigning winners and compensating losers

Wooders

Essen

2023

Econ Theory

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Ambiguity aversion in the all‐pay auction and war of attrition

Cited by 4 publications

References 50 publications

Auction design with ambiguity: Optimality of the first-price and all-pay auctions

Auction design with ambiguity: Optimality of the first-price and all-pay auctions

Free riders and the optimal prize in public‐good funding lotteries

Dual auctions for assigning winners and compensating losers

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