Favoritism in Contests: Head Starts and Handicaps
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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