The all-pay auction
In an all-pay auction, every bidder pays their bid but only the highest bidder wins the item. Qualitatively, how does this change bidding versus a standard first-price auction?
Show hints (2)+
- Losing now costs you your bid.
- Equilibrium involves randomizing and shading.
Answer
Reveal answer →Final answer
Bidders shade heavily and mix (randomize) bids, since losers still pay
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