Revenue Maximizing Head Starts in Contests

22 Pages Posted: 18 Feb 2015

See all articles by Jörg Franke

Jörg Franke

University of Dortmund - Department of Economics

Wolfgang Leininger

University of Dortmund - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Cédric Wasser

University of Basel - Faculty of Business and Economics

Date Written: December 17, 2014

Abstract

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

Franke, Jörg and Leininger, Wolfgang and Wasser, Cédric, Revenue Maximizing Head Starts in Contests (December 17, 2014). Ruhr Economic Paper No. 524, Available at SSRN: https://ssrn.com/abstract=2566237 or http://dx.doi.org/10.2139/ssrn.2566237

Jörg Franke (Contact Author)

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany

Wolfgang Leininger

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany
+49 231 755 3297 (Phone)
+49 231 755 3027 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Cédric Wasser

University of Basel - Faculty of Business and Economics ( email )

Peter-Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://www.cedricwasser.net

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