Optimal Favoritism in All-Pay Auctions and Lottery Contests

Arbeitspapier

We analyze the revenue-enhancing potential of favoring specific contestants in complete information all-pay auctions and lottery contests with several heterogeneous contestants. Two instruments of favoritism are considered: Head starts that are added to the bids of specific contestants and multiplicative biases that give idiosyncratic weights to the bids. In the all-pay auction, head starts are more effective than biases while optimally combining both instruments even yields first-best revenue. In the lottery contest, head starts are less effective than biases and combining both instruments cannot further increase revenue. As all-pay auctions revenue-dominate lottery contests under optimal biases, we thus obtain an unambiguous revenue-ranking of all six combinations of contest formats and instruments.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6274

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• Subject: all-pay auction ; lottery contest ; favoritism ; head start ; revenue dominance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Franke, Jörg ; Leininger, Wolfgang ; Wasser, Cédric
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/155516
• Last update: 10.03.2025, 11:43 AM CET