Winner's optimal reimbursement in contest

DOI10.1155/2019/9083023MaRDI QIDQ2296598zbMATH OpenOpenAlexWikidataFDO

Authors Yong Liu, Shaozeng Dong

Publication date 18 February 2020

Published in Discrete Dynamics in Nature and Society (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1155/2019/9083023

Mathematics Subject Classification ID

(n)-person games, (n>2) (91A06) Auctions, bargaining, bidding and selling, and other market models (91B26)

Review text

Summary: This paper explores a designer-optimal reimbursement scheme in all-pay auctions with winner's reimbursement. Assuming the reimbursement is a linear function of the cost of effort, we obtain analytical solutions for the contestants' symmetrical equilibrium effort and the contest organizer's expected revenue. We show that if the effort cost function is concave, the optimal reimbursement scheme is to return the full cost to the winner. On the contrary, if the effort cost function is convex, the optimal reimbursement scheme is not to compensate the winner. Moreover, we find that the organizer's expected revenue may increase or decrease as the number of contestants increases when the winner is fully reimbursed.

Recommendations

• Effect of reimbursement on all-pay auction
• Effects of risk aversion on all-pay auction with reimbursement
• The optimal design of rewards in contests
• Contests with insurance
• Differential treatment and the winner's effort in contests with incomplete information

Cites work

• Contest architecture
• Contests with endogenous entry
• Contests with insurance
• Contests with rank-order spillovers
• Effect of reimbursement on all-pay auction
• Manipulations in contests
• Sad-loser contests

Cited in

(2)

• Effect of reimbursement on all-pay auction
• Revenue in contests with many participants

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