Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111188
Authors: 
Klose, Bettina
Schweinzer, Paul
Year of Publication: 
2014
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 97 [rev.]
Abstract: 
We analyse the all-pay auction with incomplete information and variance-averse bidders. We characterise the 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 uniform valuations, we show that a more variance-averse type always bids higher than her less variance-averse counterpart. Utilising our analytical bidding functions we discuss all-pay auctions with variance-averse bidders from a designer's perspective. We extend our basic model to include noisy signals and allow for the possibility of variance-seeking preferences and type-dependent attitudes towards risk.
Subjects: 
Auctions
Contests
Mean-Variance preferences
JEL: 
C7
D7
D81
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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