DEGREE OF DIFFICULTY AS THE OBJECTIVE OF CONTEST DESIGN

Yigal Gerchak () and D. Marc Kilgour ()
Additional contact information
Yigal Gerchak: Department of Industrial Engineering, Tel Aviv University, Tel-Aviv 2069978, Israel
D. Marc Kilgour: Department of Mathematics, Wilfrid Laurier University, Waterloo, Ontario, Canada, N2L 3C5, Canada

International Game Theory Review (IGTR), 2014, vol. 16, issue 03, 1-20

Abstract: The compensation received by economic agents reflects their performance. Usually compensation reflects performance measured cardinally, but sometimes ordinal considerations play a role. It is well established that rewards — cardinal or ordinal — can rationally motivate contestants to put forth increased effort. We ask whether rewards, and in particular their cardinal or ordinal nature, can affect agents' strategies. Specifically, if level of effort is fixed and degree of difficulty is the only choice, what strategy is optimal? For example, in a high-jump competition, level of effort is not a meaningful variable; what is of interest is the choice of strategy — the height attempted, or degree of difficulty. We study how optimal strategies reflect reward structure, assuming that rewards may depend on level of difficulty, and go only to successful candidates, or only to candidates who succeed at more difficult tasks. Basing our conclusions in part on simple probabilistic models in which optimal choices can be determined analytically, we show how the structure of competitive rewards alters contestants' rational choices. We adopt a contest-design framework: What combinations of fixed and variable prizes cause contestants to select degrees of difficulty that maximize the contest designer's expected payoff? Our general conclusion is that competition can affect strategic choices, in magnitudes and even directions that are difficult to predict.

Keywords: Contest design; rewards; strategy; 91A10; 62P20; 60K10 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2014
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219198914500029
Access to full text is restricted to subscribers

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:wsi:igtrxx:v:16:y:2014:i:03:n:s0219198914500029

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219198914500029

Access Statistics for this article

International Game Theory Review (IGTR) is currently edited by David W K Yeung

More articles in International Game Theory Review (IGTR) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().