On 19th June 2017 (1-2pm) Jörg Franke, research assistant for economics at the University of Technology Dortmund, will give a presentation about “Optimal Favoritism in All-Pay Auctions and Lottery Contests" in Q4.245. Afterwards, Mr. Franke will be available for questions and discussions. His presentation is part of wiwi.uni-paderborn.de/dep1/me/research/discussing-research/seam/.
We analyze the revenue-enhancing potential of favoring specific contestants in complete informationall-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.