The optimal multi-stage contest

Qiang Fu and Jingfeng Lu ()

Economic Theory, 2012, vol. 51, issue 2, 382 pages

Abstract: This paper investigates the optimal (effort-maximizing) structure of multi-stage sequential-elimination contests. We allow the contest organizer to design the contest structure using two instruments: contest sequence (the number of stages, and the number of contestants remaining after each stage), and prize allocation. When the contest technology is sufficiently noisy, we find that multi-stage contests elicit more effort than single-stage contests. For concave and moderately convex impact functions, the contest organizer should allocate the entire prize purse to a single final prize, regardless of the contest sequence. Additional stages always increase total effort. Therefore, the optimal contest eliminates one contestant at each stage until the finale when a single winner obtains the entire prize purse. Our results thus rationalize various forms of multi-stage contests that are conducted in the real world. Copyright Springer-Verlag 2012

Keywords: Multi-stage contest; Effort maximization; Prize allocation; Winner-take-all; Sequential elimination; C7; D7; J3 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (79)

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Related works:
Working Paper: The Optimal Multi-Stage Contest (2007)
Working Paper: The optimal multi-stage contest (2006)
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DOI: 10.1007/s00199-009-0463-z

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