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15.11. Micro Theory Seminar: Juuso Välimäki

Micro Theory Seminar with Juuso Valimaki (Aalto University)

Event details
What
  • Micro Theory Seminar
When Nov 15, 2017
from 16:30 to 17:45
Where faculty room
Contact Name Stephan Lauermann
Contact Email
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Topic

All-Pay Auctions with Affiliated Values

 

Abstract

This paper analyzes all-pay auctions where the bidders have affiliated values for the object for sale and where the signals take binary values. Since signals are correlated, high signals indicate a high degree of competition in the auction and since even losing bidders must pay their bid, non-monotonic equilibria arise. We show that the game has a unique symmetric equilibrium, and that whenever the equilibrium is non-monotonic the contestants earn no rents. All-pay auctions result in low expected rents to the bidders, but also induce inefficient allocations in models with affiliated private values. With two bidders, the effect on rent extraction dominates, and all-pay auction outperforms standard auctions in terms of expected revenue. With many bidders, this revenue ranking is reversed for some parameter values and the inefficient allocations persist even in large auctions.




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