Working Paper: CEPR ID: DP7874
Authors: Reut Megidish; Aner Sela
Abstract: We study a sequential two-stage all-pay auction with two identical prizes. In each stage, the players compete for one prize and each player may win either one or two prizes. The designer may impose a cap on the players' bids in each of the stages. We analyze the equilibrium in this sequential all-pay auction with bid caps and show that capping the players' bids is profitable for a designer who wishes to maximize the players' expected total bid.
Keywords: Allpay auctions; Bid caps; Multistage contests
JEL Codes: D44; D82; J31; J41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bid cap in the first stage (D44) | total expected bids (D44) |
| bid cap in the second stage (D44) | total expected bids (D44) |
| bid cap in the first stage (D44) | effort from weaker players (C72) |
| bid cap in the first stage (D44) | effort from stronger players (C72) |
| bid cap in the first stage and bid cap in the second stage (D44) | optimal total bids (D44) |