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Erscheinungsjahr: 
2012
Schriftenreihe/Nr.: 
Working Paper No. 97
Verlag: 
University of Zurich, Department of Economics, Zurich
Zusammenfassung: 
We develop the idea of using mean-variance preferences for the analysis of the first-price, all-pay auction. On the bidding side, we characterise the optimal strategy in symmetric all-pay auctions under mean-variance preferences for general distributions of valuations and any number of bidders. We find that, in contrast to winner-pay auction formats, only hightype bidders increase their bids relative to the risk-neutral case while low types minimise variance exposure by bidding low. Introducing asymmetric variance aversions across bidders into a Uniform valuations, two-player framework, we show that a more variance-averse type bids always higher than her less variance-averse counterpart. Taking mean-variance bidding behaviour as given, we show that an expected revenue maximising seller may want to optimally limit the number of participants. Although expected revenue for risk-neutral bidders typically dominates revenue under mean-variance bidding, if the seller himself takes account of the variance of revenue, he may find it preferable to attract bidders endowed with mean-variance preferences.
Schlagwörter: 
auctions
contests
mean-variance preferences
JEL: 
C7
D7
D81
Persistent Identifier der Erstveröffentlichung: 
Dokumentart: 
Working Paper

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