The objective of this paper is to provide a comprehensive answer to some fundamental questions related to discrimination within the context of contests. For example, what forms of discrimination are possible? Can discrimination be justified? What mode of discrimination is expected? Does discrimination necessarily result in the elimination of polarization? How effective are the different modes of discrimination in inducing efforts (revenue)? How do the most widely studied contests based on an all-pay-auction and on a lottery compare under different modes of discrimination? Applying a contest-design approach, we examine four alternative types of discrimination that can be selected by a contest designer who maximizes the contestants’ efforts (his revenue). Our survey focuses on the leading principles of the separate and joint effective application of the alternative modes of direct, overt covert and head starts-discrimination that are assumed to be exercised under the widely studied family of (logit) contest success functions (CSFs). Whereas direct discrimination refers to differential taxation of the contested prize subject to a balanced-budget constraint, overt, covert and head starts-discrimination relate to structural discrimination that involves the parameters of the CSF. While the direct mode of discrimination is legally feasible, the structural modes of discrimination are more subtle and more difficult to implement and, sometimes, may even involve legal barriers.
Bibliographical notePublisher Copyright:
© 2016, Springer-Verlag Berlin Heidelberg.
- Contest design
- Contest success function
- Covert and Head starts-discrimination
- Revenue maximization