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|Title:||Competitive effect of cross-shareholdings in all-pay auctions with complete information|
|Authors:||Fu, Q. |
Virtual bidding costs
|Citation:||Fu, Q., Lu, J. (2013-05). Competitive effect of cross-shareholdings in all-pay auctions with complete information. International Journal of Industrial Organization 31 (3) : 267-277. ScholarBank@NUS Repository. https://doi.org/10.1016/j.ijindorg.2012.02.004|
|Abstract:||This paper investigates the competitive effect of cross-shareholdings in winner-take-all all-pay auctions with two asymmetric bidders. We show that cross-shareholdings may paradoxically create a "pro-competitive" effect and elicit more effort than a standard contest without cross-ownership. This observation runs in contrast to the anti-competitive effect that cross-shareholdings usually create in standard oligopolistic settings (such as Cournot or Bertrand competitions). Both bidding costs and the sizes of cross-shares affect the resultant total effort non-monotonically. Neither a cross-share nor a higher bidding cost necessarily decreases effort supply. A complete account of equilibrium bidding behaviors is provided and the necessary and sufficient conditions under which cross-shareholdings lead to higher or lower levels of overall effort are identified. However, the pro-competitive effect comes at a loss of efficiency. © 2012 Elsevier B.V. All rights reserved.|
|Source Title:||International Journal of Industrial Organization|
|Appears in Collections:||Staff Publications|
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