DEFINITION of 'All-Pay Auction'

An economic and game theory concept in which participants place silent bids on a particular item. Unlike a standard auction, all-pay auction has everybody pay for their bid, regardless of whether they win the item being sold. Of course, in a standard auction, the highest bid wins the item.

BREAKING DOWN 'All-Pay Auction'

An example of an all-pay auction is a Tullock auction, which is sometimes referred to as a Tullock lottery. Rather than being just another form of commerce, the Tullock auction and other all-pay auctions are largely intellectual pursuits, used to describe economic behaviors.

For example, in a standard auction, a seller might expect to receive fair value for the goods he or she is offering. However, in an all-play auction, overbidding is common and the seller might expect to get better-than-fair value.

RELATED TERMS
  1. Reverse Auction

    A type of auction in which sellers bid for the prices at which ...
  2. Reserve Price

    A minimum dollar amount that the owner of an item up for auction ...
  3. Chandelier Bid

    A bid that is announced by an auctioneer during an auction that ...
  4. Absolute Auction

    A type of auction where the sale is awarded to the highest bidder. ...
  5. Auction

    A system where potential buyers place competitive bids on assets ...
  6. Call Auction

    Where participants buy or sell units of a good. At a call auction, ...
Related Articles
  1. Investing

    Should You Buy A House At Auction?

    The traditional real estate market isn't the only place to conduct your home search. Auctions also bring many buying opportunities.
  2. Investing

    Explaining Dutch Auction

    A Dutch auction is a public offering auction.
  3. Managing Wealth

    3 Reasons To Buy Government Surplus for Your Small Business

    Learn why it's wise to access government surplus auctions to buy furnishings, equipment and other items to start a new business or expand an existing business.
  4. Personal Finance

    Auction Rate Securities: Bidding On The Long Run

    These investments do better with a long-term horizon. Should you buy them before they're going, going, gone?
  5. Investing

    eBay vs. DealDash: Comparing Auction Sites (EBAY, PYPL)

    Learn how the bidding process works at DealDash and eBay, and discover the potential pitfalls when making bids at these auction sites.
  6. Investing

    Should You Buy A House At Auction?

    In theory, many of the best properties are auctioned. But auctioned properties aren’t always hidden gems.
  7. Investing

    What's a T Bond?

    Treasury bonds, or T-bonds, are marketable securities issued by the US government, and are available in increments of $100. Bonds have a maturity range of ten to 30 years, with 30 being the most ...
  8. Investing

    The History Of The T-Bill Auction

    Learn how the U.S. found the perfect solution to its debt problems and ended up creating one of the largest markets in the world.
  9. Investing

    Banks Take Extra $3.5 Billion Cash Ahead of Brexit

    As liquidity concerns grow for European banks heading into next week's Brexit vote, the Bank of England is holding additional Repo auctions to ensure banks have enough liquidity heading into ...
  10. Investing

    The Auction Method: How NYSE Stock Prices are Set

    The New York Stock Exchange (NYSE), sometimes referred to as “the big board,” is the oldest and largest stock exchange in the United States. NYSE is the place investors think of when ...
RELATED FAQS
  1. What does it mean when my broker says that shares are for auction?

    An auction market is one in which stock buyers enter competitive bids and stock sellers enter competitive offers at the same ... Read Answer >>
  2. What are the maturity terms for Treasury bonds?

    Learn how treasury bonds pay interest, when they reach maturity and the differences between terms for treasury bonds and ... Read Answer >>
  3. What is an odd-lot buyback?

    An odd-lot buyback occurs when a company offers to purchase shares of its stock back from people who hold less than 100 shares. ... Read Answer >>
  4. Why is Game Theory useful in business?

    Game theory was once hailed as a revolutionary interdisciplinary phenomenon bringing together psychology, mathematics, philosophy ... Read Answer >>
  5. How are treasury bill interest rates determined?

    Find out why interest rates for U.S. Treasury bills are determined at auction and how so-called "competitive" bidders impact ... Read Answer >>
  6. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center