The value of information in asymmetric all-pay auctions
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Article
Games and Economic Behavior
Publisher:
Elsevier
Year:
2014
Journal pages:
330–338
This note analyzes a two-player all-pay auction with incomplete information. More precisely, one bidder is uncertain about the size of the initial advantage of his rival modeled as a head start in the auction.
I derive the unique Bayesian Nash equilibrium outcome for a large class of cumulative distribution functions of the head start. The stronger player generates an informational rent if and only if his head start distribution is not stochastically dominated by a uniform distribution. I identify why my results for an uncertain head start differ qualitatively from uncertainty about a cost function or a valuation.