Monday, 13:45 - 14:10 h, Room: MA 313


Alexandra Schwartz
Biased lottery versus all-pay auction contests: A revenue dominance theorem

Coauthors: Jörg Franke, Christian Kanzow, Wolfgang Leininger


We allow a contest organizer to bias a contest in a discriminatory way, that is, he can favor specific contestants through the choice of the contest success function in order to maximize the total equilibrium effort. Revenue enhancement through biasing is analyzed and compared for the two predominant contest regimes: all-pay auctions and lottery contests. In order to determine the optimally biased all-pay auction or lottery contest, the organizer has to solve a mathematical program with equilibrium constraints. We derive the optimally biased lottery contest analytically. But although this optimal lottery has a few interesting properties, it turns out that the optimally biased lottery contest will always be dominated by an appropriately biased all-pay auction.


Talk 2 of the invited session Mon.2.MA 313
"Optimization and equilibrium problems I" [...]
Cluster 3
"Complementarity & variational inequalities" [...]


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