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Unfair contests

Author

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  • E. Feess
  • Gerd Muehlheusser

    ()

  • M. Walzl

Abstract

Real-world contests are often "unfair" in the sense that outperforming all rivals may not be enough to be the winner, because some contestants are favored by the allocation rule, while others are handicapped. Examples of such contests can be inter alia found in the area of litigation and procurement.This paper analyzes discriminatory contests (which are strategically equivalent to all-pay auctions) with a handicap for one of the participants. We first characterize the equilibriumstrategies, provide closed form solutions, and illustrate the additional strategic issues arising through this asymmetry. We then analyze the issue of the optimal degree of unfairness. From a social point of view, the following trade-off arises: The disadvantage of unfair contests is that the prize may be awarded to an inferior contestant. On the other hand, under the assumption that the effort exerted by contestants to increase their chancesof winning the prize is wasteful from a social point of view, one advantage of an unfair contest is that it leads to lower effort incentives. We characterize situations in which it is optimal for an authority to either stipulate a fair contest, an interior degree of unfairness or even an infinitely unfair contest where the prize is directly awarded to one of the ontestants.
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Suggested Citation

  • E. Feess & Gerd Muehlheusser & M. Walzl, 2008. "Unfair contests," Journal of Economics, Springer, vol. 93(3), pages 267-291, April.
  • Handle: RePEc:kap:jeczfn:v:93:y:2008:i:3:p:267-291
    DOI: 10.1007/s00712-007-0308-9
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    File URL: http://hdl.handle.net/10.1007/s00712-007-0308-9
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    Other versions of this item:

    • Feess Eberhard & Muehlheusser Gerd & Walzl Markus, 2004. "Unfair Contests," Research Memorandum 050, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kräkel, Matthias, 2005. "Emotions and the Optimality of Unfair Tournaments," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 45, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Müller, Daniel, 2013. "The Doping Threshold in Sport Contests," Working papers 2013/05, Faculty of Business and Economics - University of Basel.
    3. Häfner, Samuel, 2012. "Clausewitz on Auctions," Working papers 2012/12, Faculty of Business and Economics - University of Basel.
    4. Rene Kirkegaard, 2008. "Favoritism in Contests: Head Starts and Handicaps," Working Papers 0805, Brock University, Department of Economics, revised Nov 2008.
    5. Sandra Hentschel & Gerd Muehlheusser & Dirk Sliwka, 2012. "The Impact of Managerial Change on Performance. The Role of Team Heterogeneity," CESifo Working Paper Series 3950, CESifo Group Munich.
    6. Dawid, Herbert & Muehlheusser, Gerd, 2012. "Repeated Selection with Heterogenous Individuals and Relative Age Effects," IZA Discussion Papers 6478, Institute for the Study of Labor (IZA).
    7. Christopher Cotton, 2010. "Evidence Revelation in Competitions for Access," Working Papers 2010-21, University of Miami, Department of Economics.
    8. Herbert Dawid & Gerd Muehlheusser, 2012. "Repeated Selection with Heterogenous Individuals and Relative Age Effects," CESifo Working Paper Series 3786, CESifo Group Munich.
    9. Christopher Cotton, 2013. "Competing for the Attention of Policymakers," Working Papers 2013-14, University of Miami, Department of Economics.
    10. Dawid, Herbert & Muehlheusser, Gerd, 2015. "Repeated selection with heterogeneous individuals and relative age effects," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 387-406.
    11. Minoru Kitahara & Ryo Ogawa, 2010. "All-Pay Auctions with Handicaps," ISER Discussion Paper 0781, Institute of Social and Economic Research, Osaka University, revised Jun 2010.
    12. Drugov, Mikhail & Ryvkin, Dmitry, 2017. "Biased contests for symmetric players," Games and Economic Behavior, Elsevier, vol. 103(C), pages 116-144.
    13. Yosef Mealem & Shmuel Nitzan, 2016. "Discrimination in contests: a survey," Review of Economic Design, Springer;Society for Economic Design, vol. 20(2), pages 145-172, June.
    14. Pastine, Ivan & Pastine, Tuvana, 2006. "Politician Preferences and Caps on Political Lobbying," CEPR Discussion Papers 5913, C.E.P.R. Discussion Papers.
    15. Kirkegaard, René, 2012. "Favoritism in asymmetric contests: Head starts and handicaps," Games and Economic Behavior, Elsevier, vol. 76(1), pages 226-248.
    16. repec:eee:gamebe:v:104:y:2017:i:c:p:372-391 is not listed on IDEAS
    17. Häfner, Samuel, 2017. "A tug-of-war team contest," Games and Economic Behavior, Elsevier, vol. 104(C), pages 372-391.
    18. Hodler, Roland & Yektaş, Hadi, 2012. "All-pay war," Games and Economic Behavior, Elsevier, vol. 74(2), pages 526-540.
    19. HHironori Otsubo, 2012. "Contests with Incumbency Advantages: An Experiment Investigation of the Effect of Limits on Spending Behavior and Outcome," Jena Economic Research Papers 2012-020, Friedrich-Schiller-University Jena.
    20. Christopher Cotton, 2009. "Competition for Access and Full Revelation of Evidence," Working Papers 2010-12, University of Miami, Department of Economics.

    More about this item

    Keywords

    all-pay auctions; contests; asymmetric allocation rule; rent-seeking games; asymmetric information; D44; D88;

    JEL classification:

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

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