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Expected revenue of all-pay auctions and first-price sealed-bid auctions with budget constraints |
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| Authors: | Yeon-Koo Che Ian Gale |
| Institution: | aDepartment of Economics, University of Wisconsin, Madison, WI 53706, USA;bDepartment of Economics, Georgetown University, Washington, DC 20057, and Department of Justice, Washington, DC 20530, USA |
| Abstract: | We show that all-pay auctions dominate first-price sealed-bid auctions when bidders face budget constraints. This ranking is explained by the fact that budget constraints bind less frequently in the all-pay auctions, which leads to more aggressive bidding in that format. |
| Keywords: | Budget constraints First-price sealed-bid auctions All-pay auctions |
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