All-pay auctions with risk-averse players

Gadi Fibich, Arieh Gavious, Aner Sela

Research output: Contribution to journalArticlepeer-review

Abstract

We study independent private-value all-pay auctions with risk-averse players. We show that: (1) Players with low values bid lower and players with high values bid higher than they would bid in the risk neutral case. (2) Players with low values bid lower and players with high values bid higher than they would bid in a first-price auction. (3) Players' expected utilities in an all-pay auction are lower than in a first-price auction. We also use perturbation analysis to calculate explicit approximations of the equilibrium strategies of risk-averse players and the seller's expected revenue. In particular, we show that in all-pay auctions the seller's expected payoff in the risk-averse case may be either higher or lower than in the risk neutral case.

Original languageEnglish
Pages (from-to)583-599
Number of pages17
JournalInternational Journal of Game Theory
Volume34
Issue number4
DOIs
StatePublished - Nov 2006

Keywords

  • Perturbation analysis
  • Private-value auctions
  • Risk aversion

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