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Unpublished Paper
All-Pay Auctions with Negative Prize Externalities: Theory and Experimental Evidence
(2008)
  • Armin Schmutzler, University of Zurich
  • Dario Sacco, University of Zurich
Abstract

The paper characterizes the mixed-strategy equilibria in all-pay auctions with endogenous prizes that depend positively on own effort and negatively on the effort of competitors. Such auctions arise naturally in the context of investment games, lobbying games, and promotion tournaments. We also provide an experimental analysis of a special case which captures the strategic situation of a two-stage game with investment preceding homogenous Bertrand competition. We obtain overinvestment both relative to the mixed-strategy equilibrium and the social optimum.

Disciplines
Publication Date
2008
Citation Information
Armin Schmutzler and Dario Sacco. "All-Pay Auctions with Negative Prize Externalities: Theory and Experimental Evidence" (2008)
Available at: http://works.bepress.com/armin_schmutzler/17/