On optimal head starts in all-pay auctions

We consider a two-player all-pay auction with symmetric independent private values that are uniformly distributed. The designer chooses the size of a head start that is given to one of the players. The designer’s objective is to maximize a convex combination of the expected highest effort and the ex...

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Bibliographic Details
Published in:Economics letters 2014-08, Vol.124 (2), p.211-214
Main Authors: Seel, Christian, Wasser, Cédric
Format: Article
Language:English
Subjects:
All-pay auction
Auctions
Contest
Decision analysis
Economic analysis
Experimental methods
Game theory
Head start
Management science
Normal distribution
Studies
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Summary:We consider a two-player all-pay auction with symmetric independent private values that are uniformly distributed. The designer chooses the size of a head start that is given to one of the players. The designer’s objective is to maximize a convex combination of the expected highest effort and the expected aggregate effort. Unless the weight on the highest effort is one, small head starts are always worse than no head start. Moreover, the optimal head start is strictly positive if and only if the weight on the highest effort is large enough. •We consider a two-player all-pay auction in which the designer chooses a head start.•The designer maximizes a convex combination of the expected total and highest effort.•Unless the weight on the highest effort is 1, small head starts are worse than none.•A positive head start is optimal iff the weight on the highest effort is large enough.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2014.05.018