 Optimal favoritism and maximal revenue: A generalized resultChen Cohen, Roy Darioshi and Shmuel Nitzan European Journal of Political Economy, 2022, vol. 73, issue C Abstract: A contest designer who maximizes revenue can secure almost the highest valuation of the contested prize. So far, under complete information, this has been shown assuming that the contest is based on a specific contest success function (CSF) and the designer resorts to two specific instruments of favoritism. This paper generalizes these results by establishing them for any regular CSF augmented with a differential taxation mechanism allowing the equilibrium conditions to exist. In contrast to the conclusions derived thus far, in our general setting, the maximal revenue can be achieved not only at corner but also at interior equilibria with full participation. Our study brings to a closure the longstanding effort to clarify the maximum attainable revenue and how it can be achieved within a very general framework. It explains, in particular, that neither an all-pay-auction (APA) nor any other particular CSF is superior for generating revenue based on favoritism and that a tradeoff between revenue and the extent of participation is avoidable. Keywords: Optimal contest design; Revenue maximization; Differential taxation; Corner and interior equilibria (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:73:y:2022:i:c:s0176268021001130 DOI: 10.1016/j.ejpoleco.2021.102138 Access Statistics for this article European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung More articles in European Journal of Political Economy from Elsevier |
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