Revenue Maximizing Head Starts in Contests
22 Pages Posted: 18 Feb 2015
Date Written: December 17, 2014
We characterize revenue maximizing head starts for all-pay auctions and lottery contests with many heterogeneous players. We show that under optimal head starts all-pay auctions revenue-dominate lottery contests for any degree of heterogeneity among players. Moreover, all-pay auctions with optimal head starts induce higher revenue than any multiplicatively biased all-pay auction or lottery contest. While head starts are more effective than multiplicative biases in all-pay auctions, they are less effective than multiplicative biases in lottery contests.
Keywords: All-pay auction; lottery contest; head start; revenue dominance
JEL Classification: C72, D72
Suggested Citation: Suggested Citation