Optimal favoritism in contests with identity-contingent prizes

Jingfeng Lu, Zhewei Wang and Lixue Zhou

Journal of Economic Behavior & Organization, 2022, vol. 196, issue C, 40-50

Abstract: We investigate optimal favoritism using identity-contingent prizes in a two-player Tullock model. Besides the usual balance effect, prize allocation has an extra efficiency effect: One additional unit of prize tends to induce more effort, if it is used as the winning prize for the stronger player whose marginal cost is lower. We find that a total-effort-maximizing (contest) designer should offer a larger prize to the strong player if and only if the contest is sufficiently noisy. Our paper provides a more complete analysis on identity-contingent prizes, which completes the conventional insight on levelling battle field for effort maximization in contests with asymmetric players.

Keywords: Balance effect; Efficiency effect; Favoritism; Identity-contingent prizes (search for similar items in EconPapers)
JEL-codes: C72 D72 D74 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:196:y:2022:i:c:p:40-50

DOI: 10.1016/j.jebo.2022.01.027

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