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Favoritism in Contests: Head Starts and Handicaps

Rene Kirkegaard ()

No 805, Working Papers from Brock University, Department of Economics

Abstract: We examine a contest, modelled as an all-pay auction, in which a strong and a weak contestant compete, and where a contestant may suffer from a handicap or benefit from a head start. The former reduces the contestant's score by a fixed percentage; the latter is an additive bonus. The two instruments affect the contest in significantly different ways. In particular, a handicap does not "cancel out" a head start. The effort maximizing combination of head starts and handicaps is then analyzed. In the benchmark model, it is generally profitable to give the weak contestant a head start. However, we identify a trade-off which implies that it may or may not be profitable to handicap the strong contestant. Indeed, the weak contestant may have a head start and a handicap. The trade-off is absent in a perturbed model, but there it is unambiguously the weak contestant who should be handicapped.

Keywords: All-Pay Auctions; Contests; Favoritism; Handicap; Head Start (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-11, Revised 2008-11
References: View references in EconPapers View complete reference list from CitEc
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