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Lotteries vs. All-Pay Auctions in Fair and Biased Contests

  • Gil S. Epstein
  • Yosef Mealem
  • Shmuel Nitzan

The form of contests for a single fixed prize can be determined by a designer who maximizes the contestants' efforts. This paper establishes that, under common knowledge of the two asymmetric contestants' prize valuations, a fair Tullock-type endogenously determined lottery is always superior to an all-pay-auction; it yields larger expected efforts (revenues) for the contest designer. If the contest can be unfair (structural discrimination is allowed), then the optimal lottery cannot be dominated by an all-pay-auction.

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File URL: http://hdl.handle.net/10.1111/10.1111/ecpo.12003
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Article provided by Wiley Blackwell in its journal Economics & Politics.

Volume (Year): 25 (2013)
Issue (Month): 1 (03)
Pages: 48-60

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Handle: RePEc:bla:ecopol:v:25:y:2013:i:1:p:48-60
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