hide
Free keywords:
All-pay auctions, Conflicts, Contests, Information acquisition, Asymmetric information
Abstract:
This paper considers incentives for information acquisition ahead of
conflicts. First, we characterize the (unique) equilibrium of the all-pay auction between
two playerswith one-sided asymmetric informationwhere one player has private information
about his valuation. Then, we use our results to study information acquisition
prior to an all-pay auction. If the decision to acquire information is observable, but
not the information received, one-sided asymmetric information can occur endogenously
in equilibrium. Moreover, the cut-off values of the cost of information that
determine equilibrium information acquisition are higher than those in the first best.
Thus, information acquisition is excessive. In contrast,with open or covert information
acquisition, the equilibrium cut-off values are as in the first best.
