Rent Seeking with Bounded Rationality: An Analysis of the All‐Pay Auction
Open Access
- 1 August 1998
- journal article
- Published by University of Chicago Press in Journal of Political Economy
- Vol. 106 (4) , 828-853
- https://doi.org/10.1086/250031
Abstract
The winner-take-all nature of all-pay auctions makes the outcome sensitive to decisionerrors, which we introduce with a logit formulation. The equilibrium bid distribution is a fixedpoint: the belief distributions that determine expected payoffs equal the choice distributionsdetermined by expected payoffs. We prove existence, uniqueness, and symmetry properties. Incontrast to the Nash equilibrium, the comparative statics of the logit equilibrium are intuitive:rent dissipation increases...Keywords
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