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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
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http://hdl.handle.net/10419/55338
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| Title: | | Equity and effectiveness of optimal taxation in contests under an all-pay auction  |
| Authors: | | Mealem, Yosef Nitzan, Shmuel |
| Issue Date: | | 2012 |
| Series/Report no.: | | CESifo working paper: Public Choice 3712 |
| Abstract: | | The means of contest design may include differential taxation of the prize. This paper establishes that, given a revenue-maximizing contest designer who faces a balanced-budget constraint, the optimal taxation scheme corresponding to an all-pay auction is appealing in two senses. First, it ensures exceptional equitable final prize valuations. Second, it is effective; it yields total contestants' efforts that are larger than those obtained under almost any Tullock-type lottery. Furthermore, when a budget surplus is allowed, the superiority of optimal taxation under the APA is preserved in terms of equity and effectiveness relative to optimal taxation under any contest success function. |
| Subjects: | | contest design revenue maximization balanced-budget constraint budget surplus optimal differential taxation endogenous stakes all-pay auction lottery |
| JEL: | | D70 D72 D74 D78 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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