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

13 Pages Posted: 7 Feb 2013

See all articles by Gil S. Epstein

Gil S. Epstein

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics; University College London - CReAM - Centre for Research and Analysis of Migration

Yosef Mealem

Netanya Academic College

Multiple version iconThere are 2 versions of this paper

Date Written: March 2013

Abstract

The form of contests for a single fixed prize can be determined by a designer who maximizes the contestants' efforts. This article 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 designer's payoff under the optimal lottery is equal to his expected payoff under the optimal all‐pay auction.

Suggested Citation

Epstein, Gil S. and Mealem, Yosef, Lotteries vs. All‐Pay Auctions in Fair and Biased Contests (March 2013). Economics & Politics, Vol. 25, Issue 1, pp. 48-60, 2013. Available at SSRN: https://ssrn.com/abstract=2213141 or http://dx.doi.org/10.1111/ecpo.12003

Gil S. Epstein (Contact Author)

Bar-Ilan University - Department of Economics ( email )

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Yosef Mealem

Netanya Academic College

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Netanya 42100, 4223587
Israel

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