Discussion paper

DP12456 Contests with Insurance

We study all-pay auctions under incomplete information where contestants have non-linear effort functions. Before the contest begins, the designer offers the option of insurance for which a contestant pays a premium for the contest designer who reimburses this contestant's cost of effort if he does not win. 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.


Sela, A and Y Minchuk (2017), ‘DP12456 Contests with Insurance‘, CEPR Discussion Paper No. 12456. CEPR Press, Paris & London. https://cepr.org/publications/dp12456