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

  • Gil S. Epstein


    (Bar-Ilan University)

  • Yosef Mealem
  • Shmuel Nitzan


    (Bar-Ilan University)

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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Paper provided by Bar-Ilan University, Department of Economics in its series Working Papers with number 2011-29.

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Length: 33 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:biu:wpaper:2011-29
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