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Favoritism in Contests: Head Starts and Handicaps

  • Rene Kirkegaard

    ()

    (Department of Economics, Brock University)

We examine a contest, modelled as an all-pay auction, in which a strong and a weak contestant compete, and where a contestant may suffer from a handicap or benefit from a head start. The former reduces the contestant's score by a fixed percentage; the latter is an additive bonus. The two instruments affect the contest in significantly different ways. In particular, a handicap does not "cancel out" a head start. The effort maximizing combination of head starts and handicaps is then analyzed. In the benchmark model, it is generally profitable to give the weak contestant a head start. However, we identify a trade-off which implies that it may or may not be profitable to handicap the strong contestant. Indeed, the weak contestant may have a head start and a handicap. The trade-off is absent in a perturbed model, but there it is unambiguously the weak contestant who should be handicapped.

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Paper provided by Brock University, Department of Economics in its series Working Papers with number 0805.

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Length: 29 pages
Date of creation: Nov 2008
Date of revision: Nov 2008
Handle: RePEc:brk:wpaper:0805
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  1. Gavious, Arieh & Moldovanu, Benny & Sela, Aner, 2000. "Bid Costs and Endogenous Bid Caps," Sonderforschungsbereich 504 Publications 01-19, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  2. Feess Eberhard & Muehlheusser Gerd & Walzl Markus, 2004. "Unfair Contests," Research Memorandum 050, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  3. Clark, Derek J. & Riis, Christian, 2000. "Allocation efficiency in a competitive bribery game," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 109-124, May.
  4. Konrad, Kai A., 2001. "Investment in the absence of property rights: the role of incumbency advantages
    [Investitionsanreize bei unvollständigen Eigentumsrechten: die Rolle von Asymmetrien in Aneignungskonflikten]
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-18, Social Science Research Center Berlin (WZB).
  5. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
  6. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-90, October.
  7. Nicolas Sahuguet, 2006. "Caps in asymmetric all-pay auctions with incomplete information," Economics Bulletin, AccessEcon, vol. 3(9), pages 1-8.
  8. Athey, S., 1997. "Sigle Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Working papers 97-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. repec:ebl:ecbull:v:3:y:2006:i:9:p:1-8 is not listed on IDEAS
  10. PARREIRAS, Sérgio O. & RUBINCHIK-PESSACH, Anna, 2006. "Contests with heterogeneous agents," CORE Discussion Papers 2006004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Amann, Erwin & Leininger, Wolfgang, 1996. "Asymmetric All-Pay Auctions with Incomplete Information: The Two-Player Case," Games and Economic Behavior, Elsevier, vol. 14(1), pages 1-18, May.
  12. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
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