We study all-pay auctions with variable rewards under incomplete information. In standard models, a reward depends on a bidder!s privately known type; however, in our model it is also a function of his bid. We show that in such models there is a potential for paradoxical behavior where a reduction in the rewards or an increase in costs may increase the expected sum of bids or alternatively the expected highest bid.
Similarly in a symmetric model, REF introduces variable rewards and examines a paradoxical behavior where a reduction in reward or an increase in cost may increase the total or the highest bid in expectation.
All-Pay Auctions with Variable Rewards
JOURNAL OF INDUSTRIAL ECONOMICS
Economics