question archive Suppose that 2 players participate in an all-pay auction: Each player simultaneously and independently bids for an object, and both the winner and the loser must pay their bid
Suppose that 2 players participate in an all-pay auction: Each player simultaneously and independently bids for an object, and both the winner and the loser must pay their bid
Subject:EconomicsPrice: Bought3
Suppose that 2 players participate in an all-pay auction: Each player simultaneously and independently bids for an object, and both the winner and the loser must pay their bid. Each player has a private valuation vi drawn from the uniform distribution over the interval [0, 1]. Solve for the equilibrium bid function for a player, assuming that the bid function takes the form bi = avi^2, where a is a constant. (HINT: Write down the utility and use the first order condition to solve for the equilibrium bid function. The equilibrium bid function will be in terms of the constant a. Set the bid function you get as an answer to the first order condition equal to the bid function avi2 and solve for a to get the equilibrium bid function)
