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Lottery versus All-Pay Auction Contests – A Revenue Dominance Theorem

Jörg Franke, Christian Kanzow, Wolfgang Leininger and Alexandra Schwartz

No 315, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: We allow a contest organizer to bias a contest in a discriminatory way, that is, she can favor specific contestants through the choice of contest success functions in order to maximize total equilibrium effort (resp. revenue). The scope for revenue enhancement through biasing is analyzed and compared for the two predominant contest regimes; i.e. all-pay auctions and lottery contests. Our main result reveals that an appropriately biased all-pay auction revenue dominates the optimally biased lottery contest for all levels of heterogeneity among contestants. Moreover, such a biased all-pay auction will never make use of the celebrated exclusion principle advanced by Baye et al. (1993).

Keywords: All-pay auction; lottery contest; bias; revenue (search for similar items in EconPapers)
JEL-codes: C72 D72 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://www.econstor.eu/bitstream/10419/61372/1/722218079.pdf (application/pdf)

Related works:
Journal Article: Lottery versus all-pay auction contests: A revenue dominance theorem (2014) Downloads
Working Paper: Lottery versus All-Pay Auction Contests: A Revenue Dominance Theorem (2014)
Working Paper: Lottery versus All-Pay Auction Contests: A Revenue Dominance Theorem (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:315

DOI: 10.4419/86788361

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