Entry regulations and optimal prize allocation in parallel contests

Martin Grossmann

Review of Economic Design, 2021, vol. 25, issue 4, No 4, 289-316

Abstract: Abstract In parallel contests, the contest organizer controls the entry of heterogeneous contestants by regulating access to the contests and determining the prize allocation across contests. The organizer can prevent a contestant from entering more than one contest. I show that the organizer allows entry to multiple contests and uniquely sets identical prizes across contests to maximize aggregate effort in all contests. Independent of the entry regulation, I find no sorting effects. Thus, a contest with a relatively high prize does not necessarily attract contestants with higher abilities. Furthermore, I discover interesting spillover effects of prizes between contests in the case of restricted entry regulations. For instance, the individual (aggregate) effort increases (decreases) in a contest if the prize in another contest increases. The endogeneity of contestants’ participation drives many of these results.

Keywords: Parallel contests; Entry; Aggregate taking behavior; C72; D72 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10058-021-00250-x

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