Equity and effectiveness of optimal taxation in contests under an all-pay auction

Yosef Mealem () and Shmuel Nitzan

Social Choice and Welfare, 2014, vol. 42, issue 2, 437-464

Abstract: The means of contest design may include differential taxation of the prize. This paper considers all-pay auctions under complete information and establishes that, given a revenue-maximizing contest designer who faces a balanced-budget constraint, the optimal taxation scheme corresponding to an all-pay auction is appealing in two senses. First, it ensures extreme equitable final prize valuations. Second, it is effective; it yields total contestants’ efforts that are larger than those obtained under almost any pure-strategy equilibrium of a Tullock-type lottery contest. Copyright Springer-Verlag Berlin Heidelberg 2014

Date: 2014
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Working Paper: Equity and Effectiveness of Optimal Taxation in Contests under an All-Pay Auction (2012)
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DOI: 10.1007/s00355-013-0727-1

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