Maria Betto

Asymmetric All-Pay Auctions with Spillovers

with Matthew W. Thomas, Theoretical Economics, 2024

When opposing parties compete for a prize, the sunk effort players exert during the conflict can affect the value of the winner’s reward. These spillovers can have substantial influence on the equilibrium behavior of participants in applications such as lobbying, warfare, labor tournaments, marketing, and R&D races. To understand this influence, we study a general class of asymmetric, two-player all-pay auctions where we allow for spillovers in each player’s reward. The link between participants’ efforts and rewards yields novel effects — in particular, players with higher costs and lower values than their opponent sometimes extract larger payoffs.

Cognition in Preferences and Choice

This paper models and analyzes the role of cognition in the refinement of preferences and choices. As cognition increases, choices become more selective, resulting in narrower sets of preferred options and finer rankings. To characterize this behavior, the classical rational-choice framework is extended through the introduction of a modified version of the Weak Axiom, called the Weak Axiom of Revealed Preference Difficulty (WARPD). The paper shows that WARPD is equivalent to an interval-valued utility representation, where the size of the interval decreases monotonically with cognition. It also demonstrates that WARPD is equivalent to a fuzzy rationalizability concept, implying that cognition-dependent choices satisfying WARPD can be represented by a complete and transitive fuzzy binary relation. Finally, the paper describes two applications which highlight how consumers’ choice coarseness influences firms’ strategic pricing decisions in different competitive settings.