 Optimal orchestration of rewards and punishments in rank-order contestsBin Liu and Jingfeng Lu Journal of Economic Theory, 2023, vol. 208, issue C Abstract: We allow negative prizes and investigate effort-maximizing prize design in rank-order contests with incomplete information. Endogenous participation arises due to less-efficient types' incentive to avoid punishments. The optimum features winner-take-all for the best performer and at most one punishment for the worst performer among all potential contestants, whenever they enter the competition. Based on this, we then (1) provide a necessary and sufficient condition for the optimality of pure winner-take-all without punishment; and (2) show that the optimal entry threshold increases with the total number of contestants and converges to the Myerson cutoff in the limit. Finally, we characterize the optimal entry-dependent prize structure, allowing the prize sequence to vary with the number of entrants. The optimal design must entail endogenous entry, and it harmonically integrates both winner-take-all and egality. Keywords: All-pay auction; Incomplete information; Negative prize; Endogenous entry; Optimal contest (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:208:y:2023:i:c:s0022053122001843 DOI: 10.1016/j.jet.2022.105594 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.