Contests where there is variation in the marginal productivity of effort

Nirvikar Singh and Donald Wittman

Economic Theory, 2001, vol. 18, issue 3, 744 pages

Abstract: We provide a characterization of participants' behavior in a contest or tournament where the marginal productivity of effort varies across contestants and individual productivity is private information. We then consider the optimal design of such a contest. We first analyze contestant behavior for the usual type of contest, where the highest output wins. Abilities need not be independently distributed. We demonstrate that there is a unique symmetric equilibrium output function, that output is increasing in ability, and that marginal effort is increasing in ability, while effort decreases when the cost of effort increases. Next we consider the case where the highest output need not win, with independently distributed abilities. We analyze the contest designer's decisions in choosing contest rules optimal from her perspective. We show that the output produced, probability of winning, and contest designer's expected revenue are generally increasing in contestants' ability. We examine the relationship between the marginal cost of producing output and marginal utility per dollar of the net award for winning.

Keywords: Optimal contest; Contest design; Asymmetric information; Correlated abilities. (search for similar items in EconPapers)
JEL-codes: D3 D8 J3 (search for similar items in EconPapers)
Date: 2001-06-11
Note: Received: July 30, 1998; revised version: August 7, 2000
References: Add references at CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://link.springer.de/link/service/journals/00199/papers/1018003/10180711.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

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: https://EconPapers.repec.org/RePEc:spr:joecth:v:18:y:2001:i:3:p:711-744

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().