Volume 35, Number 3, 407-440, DOI: 10.1007/s00199-007-0249-0

Non-monotoniticies and the all-pay auction tie-breaking rule

Aloisio Araujo, Luciano I. de Castro and Humberto Moreira

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Abstract

Discontinuous games, such as auctions, may require special tie-breaking rules to guarantee equilibrium existence. The best results available ensure equilibrium existence only in mixed strategy with endogenously defined tie-breaking rules and communication of private information. We show that an all-pay auction tie-breaking rule is sufficient for the existence of pure strategy equilibrium in a class of auctions. The rule is explicitly defined and does not require communication of private information. We also characterize when special tie-breaking rules are really needed.

Keywords  Auctions - Pure strategy equilibria - Non-monotonic bidding functions - Tie-breaking rules - Necessary and sufficient conditions for equilibrium - Multidimensional types

JEL Classification Numbers  C62 - C72 - D44 - D82

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