All-pay auction, Game Theory

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A type of auction in which the highest bidder is rewarded the object, but all bidders pay the auctioneer their bids. This differs from traditional first price auctions in which only the winner pays the auctioneer his or her bid. All-pay auctions are often used to model political races or patent races among firms. A probabilistic edition of the all-pay auction is the Chinese auction.

 


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