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: | 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.