Rent Seeking with Bounded Rationality: An Analysis of the All‐Pay Auction

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Abstract
The winner-take-all nature of all-pay auctions makes the outcome sensitive to decisionerrors, which we introduce with a logit formulation. The equilibrium bid distribution is a fixedpoint: the belief distributions that determine expected payoffs equal the choice distributionsdetermined by expected payoffs. We prove existence, uniqueness, and symmetry properties. Incontrast to the Nash equilibrium, the comparative statics of the logit equilibrium are intuitive:rent dissipation increases...