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"We analyze a new auction format in which bidders pay a fee each time they increase the auction price. Bidding fees are the primary source of revenue for the seller, but produce the same expected revenue as standard auctions. Our model predicts a particular distribution of ending prices, which we test against observed auction data. Our model fits the data well for over three-fourths of routinely auctioned items. The notable exceptions are video game paraphernalia, which show more aggressive bidding and higher expected revenue. By incorporating mild risk-loving preferences in the model, we explain nearly all of the auctions"--National Bureau of Economic Research web site

We study a model of war in which the outcome of the war is uncertain from the perspective of the involved countries not because of luck on the battlefield (as in standard models) but because of their lack of information about their opponents. In our model there are two countries characterized by their production and military technologies and their resources. While technologies are common knowledge, resources are private information. Each country decides how to allocate its resources to production and warfare. The country with the stronger military wins and receives aggregate production. In equilibrium the country with a comparative advantage in warfare allocates its entire resources to warfare for low resource levels and follows a non-decreasing concave strategy thereafter. In response to that, the other country allocates a constant fraction of its resources to warfare for relatively low resource levels and follows an increasing non-linear strategy thereafter. Unless its military technology is much weaker than the opponent's, the country with a comparative advantage in warfare chooses the stronger military at any resource level. From an ex ante perspective it is therefore likely to win the war.

"Befinden sich Firmen im Wettkampf in 'All-Pay' Auktionen unter vollständiger
Information, so bringen stille Beteiligungen asymmetrische externe Effekte in
den gesamten Auktionsrahmen. Hält die stärkste Firma einen großen Anteil an
Aktien der zweitstärksten Firma, kann dies die stärkere Firma von weiteren
Geboten abhalten. Als Folge vergrößern sich die Profite beider Firmen, sind
jedoch weniger effizient verteilt. Das umgekehrte Eigentumsverhältnis hebt
voraussichtlich die Gewinne der beteiligten Firmen an, jedoch ohne negative
Effizienzauswirkungen." (Autorenreferat)

In many contests in economic and political life, both all-pay and winner-pay expenditures matter for winning. This paper studies such hybrid contests under symmetry and asymmetry. The symmetric model assumes very little structure but yields a simple closed-form solution. More contestants tend to lead to substitution toward winner-pay investments, and total expenditures are always lower than in the corresponding all-pay contest. With a biased decision process and two contestants, the favored contestant wins with a higher likelihood, chooses less winner-pay investments, and contributes more to total expenditures. An endogenous bias that maximizes total expenditures disfavors the high-valuation contestant but still makes her the more likely one to win.

Contests are well-established mechanisms for political lobbying, innovation, rentseeking, incentivizing workers, and advancing R&D. A well-known theoretical result in the contest literature is that greater heterogeneity decreases investments of contestants because of the "discouragement effect." Leveling the playing field by favoring weaker contestants through strict bid-caps and favorable tie-breaking rules can reduce discouragement and increase the designer's revenue. We test these predictions in a laboratory experiment. Our data confirm that placing bid-caps and using favorable tie-breaking rules significantly diminishes discouragement in weaker contestants. The impact on revenue is more intricate. In contrast to theory, a strict bid-cap does not increase revenue, but a mild bid-cap can increase revenue even when not predicted by theory. Our data also show that tie-breaking rules seem to have little impact on the designer's revenue: the encouragement of weaker contestants is offset by stronger contestants competing less aggressively. We discuss deviations from the Nash predictions in light of different behavioral approaches.

Defence date: 26 July 2018 ; Examining Board: Prof. David K. Levine, EUI (Supervisor); Prof. Peter Cramton, University of Cologne; Prof. Salvatore Modica, University of Palermo; Prof. Robert Wilson, Stanford Business School ; The pay-as-bid auction, also called the discriminatory price auction, is among the most common auction formats to price and allocate assets and commodities. Trillions of dollars each year are traded in pay-as-bid auctions. The format is the natural multiunit extension of the first-price auction of a single item. Bidders specify a price for each unit they want to buy. The market clears at the price where supply intersects aggregate demand and winning bidders pay their bids for each unit won. In the first chapter of my thesis, I explain strategic differences and similarities between the single-item and multi-unit case. In practice, it is rare that multi-unit auctions take place in isolation. The second chapter introduces a model of interconnected pay-as-bid auctions. The auctions run in parallel and offer perfectly divisible substitute goods to the same set of symmetrically informed bidders with multi-unit demand. This connects the demand side of both auctions. The supply side is linked because the total amounts for sale may be correlated. I show that there exists a unique symmetric Bayesian Nash equilibrium when the marginal distributions of supply have weakly decreasing hazard rates. I then develop practical policy recommendations on how to exploit the interconnection across auctions to increase revenues. These theoretic insights are the basis for the final chapter of my thesis. In collaboration with Jason Allen (Bank of Canada) and Jakub Kastl (Princeton University) I use data from auctions of Canadian debt to quantify the extent to which demands for securities with different maturities are interdependent. Generalizing methods for estimating demand schedules from bidding data to allow for interdependencies, our results suggest that 3, 6 and 12-month bills are often complementary in the primary market for Treasury bills. We present a model that captures the interplay between the primary and secondary markets to provide a rationale for our findings. ; -- 1. Pay-as-bid vs. First-price auctions Similarities and differences in strategic behavior -- 2. I nterconnected Pay-As-Bid Auctions -- 3. I dentifying Dependencies in the Demand for Government Securities -- 4. APPENDIX

A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the "discouragement effect." Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer's revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning.