Chowdhury, S.M. (2017) The all-pay auction with nonmonotonic payoff. Southern Economic Journal, 84 (2). pp. 375-390. ISSN 0038-4038
Abstract
I model innovation contests as an all-pay auction in which it is possible not to achieve successful innovation despite costly R&D investments, and as a result, there is no winner. In such a case, the winning payoff turns out to be nonmonotonic in own bid. I derive the sufficient conditions for the existence of pure strategy equilibria, and fully characterize the nondegenerate mixed strategy equilibrium. In the mixed strategy equilibrium, the support of the low-value bidder is not continuous, and both the high-value and the low-value bidders place an atom in the (distinct) lower bound of their respective support. Under symmetric valuation, both bidders place an atom at zero. These results can explain why one does not observe very low quality innovation in real life, or why even symmetric firms may stay out of an innovation contest.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2017 by the Southern Economic Association. This is an author-produced version of a paper subsequently published in Southern Economic Journal. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | C72; 74; D44; O30 |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 01 Jun 2023 13:36 |
Last Modified: | 01 Jun 2023 17:04 |
Status: | Published |
Publisher: | Wiley |
Refereed: | Yes |
Identification Number: | 10.1002/soej.12229 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:199697 |