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Ambiguity aversion in the all‐pay auction and war of attrition
Author(s) -
Stong Steven
Publication year - 2018
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12345
Subject(s) - ambiguity , attrition , economics , vickrey auction , microeconomics , revenue equivalence , reverse auction , auction theory , common value auction , computer science , medicine , dentistry , programming language
Ambiguity aversion is introduced to a class of commonly applied games including the war of attrition and all‐pay auction. In contrast to subjective expected utility, the all‐pay auction is shown to generate less expected expenditure than the first‐price auction. The war of attrition generates less expected expenditure than the all‐pay auction and second‐price auction. In the all‐pay auction, increasing ambiguity causes low types to bid lower and high types to bid higher. In the war of attrition, ambiguity can decrease the bids for all types.