Abstract
We study all-pay auctions under incomplete information in which contestants have non-linear effort functions. The designer offers the option of insurance for which a contestant pays a premium to the contest designer. If a contestant does not win he is reimbursed the cost of his effort. We demonstrate that contests with insurance may be profitable for a designer who wishes to maximize his expected revenue as based on the contestants’ expected total effort, the premium of the insured contestants, and their reimbursement.
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