Economics at your fingertips  

How to split the pie: Optimal rewards in dynamic multi-battle competitions

Xin Feng and Jingfeng Lu ()

Journal of Public Economics, 2018, vol. 160, issue C, 82-95

Abstract: Multi-battle competitions are ubiquitous in real life. In this paper, we examine the effort-maximizing reward design in sequentially played multi-battle competitions between two players. The organizer has a fixed prize budget, and rewards players contingent on the number of battles they win in a three-battle contest. A full spectrum of contest technologies in the Tullock family is accommodated. We find that the optimal design varies with the discriminatory power of the contest technology. In particular, when it is in the low range, winner-take-all is optimal. For the intermediate range, as discriminatory power increases, the optimal prize structure evolves continuously from winner-take-all to the proportional-division rule due to the need to mitigate the growing momentum/discouragement effect. For the high range, a wide span of prize structures extracts full surplus and is thus optimal. Several robustness checks confirm that mitigating the momentum/discouragement effect is essential for effort-maximizing prize design in dynamic multi-battle contests.

Keywords: Effort maximization; Multi-battle contest; Proportional-division rule; Split-award; Winner-take-all (search for similar items in EconPapers)
JEL-codes: D72 D74 D81 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-10-04
Handle: RePEc:eee:pubeco:v:160:y:2018:i:c:p:82-95