On Optimal Head Starts in All-Pay Auctions
11 Pages Posted: 21 Mar 2014 Last revised: 17 Apr 2014
Date Written: April 16, 2014
We consider a two-player all-pay auction with symmetric independent private values that are uniformly distributed. The designer chooses the size of a head start that is given to one of the players. The designer's objective is to maximize a convex combination of the expected highest effort and the expected aggregate effort. Unless the weight on the highest effort is one, small head starts are always worse than no head start. Moreover, the optimal head start is strictly positive if and only if the weight on the highest effort is large enough.
Keywords: Contest, All-pay auction, Head start
JEL Classification: C72, D44, D74, D82
Suggested Citation: Suggested Citation