Optimal favoritism in all-pay auctions and lottery contests

Franke, Jörg; Leininger, Wolfgang; Wasser, Cédric

doi:10.1016/j.euroecorev.2018.02.001

Cited by 45 publications

(37 citation statements)

References 44 publications

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“…In this equilibrium the stronger player bids v 1 and the weaker player remains inactive. Franke, Leininger, and Wasser (2018) extend this result to more than 2 players, and compare the expected aggregate effort between a lottery and an APA. It turns out that multiplicative biases are more effective in lotteries because more participation is induced.…”

Section: Additive and Multiplicative Biasesmentioning

confidence: 82%

Heterogeneity, Leveling the Playing Field, and Affirmative Action in Contests

2020

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The heterogeneous abilities of the players in various competitive contexts often lead to undesirable outcomes such as low effort provision, lack of diversity, and inequality. A range of policies are implemented to mitigate such issues by enforcing competitive balance, i.e., leveling the playing field. While a number of such policies are aimed at increasing competition, affirmative action (AA) policies are historically practiced in an ethical response to historical discrimination against particular social groups among winners. This survey summarizes the rapidly growing literature of contest theory on AA and other policies that level the playing field. Using a general theoretical structure, we outline research on player and contest designer behavior under a multitude of policy mechanisms; and discuss the theoretical, experimental, and empirical results in relation to some of the common debates surrounding AA.

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Section: Additive and Multiplicative Biasesmentioning

confidence: 82%

Heterogeneity, Leveling the Playing Field, and Affirmative Action in Contests

2020

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“…Suppose, as in Franke et al (2013) and Franke et al (2018), that the principal can determine the amount of bias that is afforded the winner of the first contest in contest two. The following proposition determines the optimal level of the bias, and indicates the proportional gain that can be achieved by running an optimal two-contest series rather than a single contest.…”

Section: Discussionmentioning

confidence: 99%

“…7 Note that the winner of contest one gains an advantage in contest two that is associated with the act of winning and not with the margin of victory. A one-shot contest using a form similar to (2) has been investigated by Franke et al (2013) and Franke et al (2018). Beviá and Corchón (2013) investigate a two-player model in which the outcome of the first contest affects contestants' strength in a second contest.…”

Section: Modelmentioning

confidence: 99%

Gaining advantage by winning contests

2020

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We consider a principal who faces many identical competitors, and who can distribute a prize fund over two consecutive contests. The winner of contest one gains an advantage in contest two where his effort is more productive than all rivals. We identify a tipping point for the productivity parameter, below which it is optimal for an effort-maximizing principal to place the whole prize in the second contest. Above this level, a single symmetric contest is preferred. The institution chosen depends inextricably upon the number of competitors and their valuation of future gains and costs. We identify the optimal setting of the productivity parameter, showing that introducing asymmetry can increase total efforts by as much as one quarter compared to a single symmetric contest. Keywords Contest • Win advantage • Effort incentives • Budget division JEL Classification D74 • D72 We are grateful to participants at various seminars and workshops for comments. We are grateful for the insightful comments of two anonymous referees, an Associate Editor, and the Editor Huseyin Yildirim. Errors are our own. Nilssen has received funding for his research through the ESOP Centre at the University of Oslo. ESOP received support from the Research Council of Norway through its Centres of Excellence funding scheme, Project Number 179552.

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“…3 This class contains the biased lottery or fixed-prize raffle as special case (f i (x i ) = i x i ), but also other types of favoritism like head starts (f i (x i ) = x i + i ), where players obtain an up-front lump-sum bonus of lottery tickets. For simple contest games, this general class of contest success functions has been analyzed in Franke, Leininger, and Wasser (2018), where it is shown that within this class an appropriately biased lottery leads to highest total contributions. In other words, competitive pressure under the optimally biased lottery is higher in comparison to any other contest success function of this class.…”

Section: More General Contest Success Functionsmentioning

confidence: 99%

Lotteries and Lindahl prices in public good provision

Franke

Leininger

2018

J Public Economic Theory

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Lotteries are traditional instruments for fundraising in general. Morgan has shown that they can also be very effective in the provision of a public good. However, a fair lottery can only enhance provision but never result in the efficient amount. Franke and Leininger show how—by borrowing from optimal contest theory—biased lotteries can provide the efficient amount of the public good. This paper aligns this result with standard public good theory, in particular the classic notion of Lindahl pricing. It shows that biased lotteries can—implicitly—implement Lindahl pricing of the public good in noncooperative Nash equilibrium.

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Optimal favoritism in all-pay auctions and lottery contests

Cited by 45 publications

References 44 publications

Heterogeneity, Leveling the Playing Field, and Affirmative Action in Contests

Heterogeneity, Leveling the Playing Field, and Affirmative Action in Contests

Gaining advantage by winning contests

Lotteries and Lindahl prices in public good provision

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