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Contests with Insurance

Aner Sela

No 12456, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study all-pay auctions under incomplete information where contestants have non-linear effort functions. Before the contest begins, the designer offers the option of insurance for which a contestant pays a premium for the contest designer who reimburses this contestant's cost of effort if he does not win. We demonstrate that contests with insurance may be profitable for a designer who wishes to maximize his expected revenue as based on the contestants expected total effort, the premium of the insured contestants, and their reimbursement.

Keywords: all-pay auctions; Contests; Insurance; reimbursement (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth and nep-ias
Date: 2017-11
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