Abstract
A contest designer who maximizes revenue can secure almost the highest valuation of the contested prize. So far, under complete information, this has been shown assuming that the contest is based on a specific contest success function (CSF) and the designer resorts to two specific instruments of favoritism. This paper generalizes these results by establishing them for any regular CSF augmented with a differential taxation mechanism allowing the equilibrium conditions to exist. In contrast to the conclusions derived thus far, in our general setting, the maximal revenue can be achieved not only at corner but also at interior equilibria with full participation. Our study brings to a closure the longstanding effort to clarify the maximum attainable revenue and how it can be achieved within a very general framework. It explains, in particular, that neither an all-pay-auction (APA) nor any other particular CSF is superior for generating revenue based on favoritism and that a tradeoff between revenue and the extent of participation is avoidable.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
