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Auctioning risk: The all-pay auction under mean-variance preferences, joint with Bettina Klose, University of Zurich.

Thursday 23 January 2014, 1.00PM to 2.00pm

Speaker(s): Paul Schweinzer, University of York

Abstract: We analyse the all-pay auction with incomplete information and variance-averse bidders. We characterise the symmetric equilibrium for general distributions of valuations and any number of bidders. Variance aversion is a sufficient assumption to predict that high- valuation bidders increase their bids relative to the risk-neutral case while low types decrease their bid.  Considering an asymmetric two-player environment with uniform valuations, we show that a more variance-averse type always bids higher than her less variance-averse counterpart. Taking mean-variance bidding behaviour as given, we show that an expected revenue maximising seller may want to optimally limit the number of participants.

Location: Economics Staff Room (EC/202)

Admission: Economics Thursday Workshop. For Staff and Postgraduate students