DP7874 Caps in Sequential Contests
|Author(s):||Reut Megidish, Aner Sela|
|Publication Date:||June 2010|
|Keyword(s):||All-pay auctions, Bid caps, Multi-stage contests|
|JEL(s):||D44, D82, J31, J41|
|Programme Areas:||Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7874|
We study a sequential two-stage all-pay auction with two identical prizes. In each stage, the players compete for one prize and each player may win either one or two prizes. The designer may impose a cap on the players' bids in each of the stages. We analyze the equilibrium in this sequential all-pay auction with bid caps and show that capping the players' bids is profitable for a designer who wishes to maximize the players' expected total bid.