All-Pay Auction, explained.
An all-pay auction requires every bidder to pay their bid while only the winner receives the prize, subject to stated tie rules.
Why it happens
A rival bids uniformly over integers one through ten. The highest bid wins a prize worth twelve; ties split it. The board reports actual net payoff and the exact average across the ten possible rival bids.
An all-pay auction requires every bidder to pay their bid while only the winner receives the prize, subject to stated tie rules.
Read the result
Net payoff subtracts your bid whether you win, tie or lose. The ten-case average describes only the declared uniform rival.
A worked example
Buy a chance at a twelve-unit prize
Select an integer bid while the rival’s one-through-ten bid remains hidden.
Submit once and subtract the full bid from either twelve, six on a tie, or zero on a loss.
Compare that realised payoff with the exact ten-rival average without interpreting one win as evidence of a profitable strategy.
OPTIONAL DEEPER DETAILGo deeper: inside the model
Inside this model
A rival bids uniformly over integers one through ten. The highest bid wins a prize worth twelve; ties split it. The board reports actual net payoff and the exact average across the ten possible rival bids.
Where this idea is useful
A practical use
Distinguish contests where effort is irrecoverable from auctions in which only the winner pays.
A common misconception
“Only the winning bidder pays in every auction.”
All-pay rules explicitly charge everyone. This difference changes expected costs and can make aggressive losing effort expensive.
What this explanation leaves out
- A fixed uniform bot and split-prize ties are assumed. This is not an equilibrium prediction for real contests.
Does the game solve a strategic all-pay equilibrium?
No. It compares choices against a fixed uniform bot; changing the rival strategy or tie rule would change the payoff calculation.
Which effort costs remain even when you do not receive the prize?
Associated thinkers
Associations marked provisional are awaiting source review.
Further reading
Explore the original research or the teaching reference behind this experiment.