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

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Listed:
  • Gil S. Epstein

    () (Bar-Ilan University)

  • Yosef Mealem
  • Shmuel Nitzan

    () (Bar-Ilan University)

Abstract

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.

Suggested Citation

  • Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2011. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," Working Papers 2011-29, Bar-Ilan University, Department of Economics.
  • Handle: RePEc:biu:wpaper:2011-29
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:jcecon:v:46:y:2018:i:1:p:284-307 is not listed on IDEAS
    2. Alexander Matros & Alex Possajennikov, 2014. "Common Value Allocation Mechanisms with Private Information: Lotteries or Auctions?," Discussion Papers 2014-07, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    3. Ewerhart, Christian, 2017. "Revenue ranking of optimally biased contests: The case of two players," Economics Letters, Elsevier, vol. 157(C), pages 167-170.
    4. repec:eee:ecolet:v:159:y:2017:i:c:p:61-64 is not listed on IDEAS
    5. Franke, Jörg & Kanzow, Christian & Leininger, Wolfgang & Schwartz, Alexandra, 2014. "Lottery versus all-pay auction contests: A revenue dominance theorem," Games and Economic Behavior, Elsevier, vol. 83(C), pages 116-126.
    6. 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.
    7. Epstein, Gil S. & Mealem, Yosef, 2013. "Politicians, Governed vs. Non-Governed Interest Groups and Rent Dissipation," IZA Discussion Papers 7736, Institute for the Study of Labor (IZA).
    8. Jörg Franke & Wolfgang Leininger & Cédric Wasser, 2016. "Optimal Favoritism in All-Pay Auctions and Lottery Contests," CESifo Working Paper Series 6274, CESifo Group Munich.
    9. Christian Ewerhart & Julia Grünseis, 2018. "Voluntary disclosure in unfair contests," ECON - Working Papers 279, Department of Economics - University of Zurich.
    10. Yosef Mealem & Shmuel Nitzan, 2012. "Differential Prize Taxation and Structural Discrimination in Contests," CESifo Working Paper Series 3831, CESifo Group Munich.
    11. Yosef Mealem & Shmuel Nitzan, 2014. "Equity and effectiveness of optimal taxation in contests under an all-pay auction," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(2), pages 437-464, February.
    12. Yosef Mealem & Shmuel Nitzan, 2013. "Direct and Structural Discrimination in Contests," CESifo Working Paper Series 4518, CESifo Group Munich.
    13. Gil Epstein & Yosef Mealem, 2015. "Politicians, governed versus non-governed interest groups and rent dissipation," Theory and Decision, Springer, vol. 79(1), pages 133-149, July.

    More about this item

    Keywords

    contest design; efforts (revenue) maximization; discrimination; endogenous lottery; all-pay auction.;

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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