Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/155516
Authors: 
Franke, Jörg
Leininger, Wolfgang
Wasser, Cédric
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6274
Abstract: 
We analyze the revenue-enhancing potential of favoring specific contestants in complete information all-pay auctions and lottery contests with several heterogeneous contestants. Two instruments of favoritism are considered: Head starts that are added to the bids of specific contestants and multiplicative biases that give idiosyncratic weights to the bids. In the all-pay auction, head starts are more effective than biases while optimally combining both instruments even yields first-best revenue. In the lottery contest, head starts are less effective than biases and combining both instruments cannot further increase revenue. As all-pay auctions revenue-dominate lottery contests under optimal biases, we thus obtain an unambiguous revenue-ranking of all six combinations of contest formats and instruments.
Subjects: 
all-pay auction
lottery contest
favoritism
head start
revenue dominance
JEL: 
C72
D72
Document Type: 
Working Paper

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