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Type	Working Paper
Scope	Discipline-based scholarship
Title	Auctioning risk: The all-pay auction under mean-variance preferences
Organization Unit	Department of Business Administration (Egon Franck) Department of Economics (Florian Scheuer)
Authors	Bettina Susanne Klose Paul Schweinzer
Language	English
Institution	University of Zurich
Series Name	Working paper series / Department of Economics
Number	97
ISSN	1664-7041
Number of Pages	40
Date	2017
Abstract Text	We analyse the all-pay auction with incomplete information and variance-averse bidders. We characterise the unique symmetric equilibrium for general distributions of valuations and any number of bidders. Variance aversion is a sufficient assumption to predict that high-valuation bidders increase their bids relative to the risk-neutral case while low types decrease their bid. Considering an asymmetric two-player environment with uniformly distributed valuations, we show that a variance-averse player always bids higher than her risk-neutral opponent with the same valuation. Utilising our analytically derived bidding functions we discuss all-pay auctions with variance-averse bidders from an auction designer’s perspective. We briefly consider possible extensions of our model, including noisy signals, type-dependent attitudes towards risk, and variance-seeking preferences.
Related URLs	https://www.econ.uzh.ch/en/research/workingpapers.html
Other Identification Number	merlin-id:7561
PDF File	Download from ZORA
Export	BibTeX EP3 XML (ZORA)
Keywords	All-pay auctions, contests, incomplete information, private values, risk-aversion, mean-variance preferences, Auktionstheorie, Präferenzordnung, Entscheidungstheorie
Additional Information	Revised version