Favoritism in asymmetric contests: Head starts and handicaps

I examine a contest with identity-dependent rules in which contestants are privately informed and ex ante heterogeneous. A contestant may suffer from a handicap or benefit from a head start. The former reduces the contestantʼs score by a fixed percentage; the latter is an additive bonus. Although total effort increases if the weak contestant is favored with a head start, the optimal use of handicaps is not as clear-cut. Depending on the nature of the asymmetry, it may or may not be optimal to handicap the strong contestant. Moreover, it is generally optimal to combine the two instruments. For instance, when contestants are sufficiently heterogeneous the weak contestant should be given both a head start and a handicap. It may also be possible to induce higher effort and at the same time make both contestants better off ex ante.