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Contests with Insurance

Author

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  • Sela, Aner
  • Minchuk, Yizhaq

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.

Suggested Citation

  • Sela, Aner & Minchuk, Yizhaq, 2017. "Contests with Insurance," CEPR Discussion Papers 12456, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12456
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    References listed on IDEAS

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    Cited by:

    1. Yizhaq Minchuk & Aner Sela, 2021. "Subsidy and Taxation in All-Pay Auctions under Incomplete," Working Papers 2104, Ben-Gurion University of the Negev, Department of Economics.
    2. Sosung Baik & Sung-Ha Hwang, 2021. "Auction design with ambiguity: Optimality of the first-price and all-pay auctions," Papers 2110.08563, arXiv.org.
    3. Yizhaq Minchuk, 2021. "Reimbursement as a tool to reduce sabotaging in rent‐seeking contests," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 235-238, January.
    4. Minchuk, Yizhaq, 2018. "Effect of reimbursement on all-pay auction," Economics Letters, Elsevier, vol. 172(C), pages 28-30.
    5. Minchuk, Yizhaq & Sela, Aner, 2023. "Subsidy and taxation in all-pay auctions under incomplete information," Games and Economic Behavior, Elsevier, vol. 140(C), pages 99-114.

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    More about this item

    Keywords

    Contests; All-pay auctions; Reimbursement; Insurance;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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