Tournaments with a Standard

Mikhail Drugov, Dmitry Ryvkin and Jun Zhang

Papers from arXiv.org

Abstract: We study tournaments where winning a rank-dependent prize requires passing a minimum performance standard. We show that, for any prize allocation, the optimal standard is always at a mode of performance that is weakly higher than the global mode and identify a necessary and sufficient condition for it to be at the global mode. When the prize scheme can be designed as well, the winner-take-all prize scheme is optimal for noise distributions with an increasing failure rate; and awarding equal prizes to all qualifying agents is optimal for noise distributions with a decreasing failure rate. For distributions with monotone likelihood ratios -- log-concave and log-convex, respectively -- these pay schemes are also optimal in a larger class of anonymous, monotone contracts that may depend on cardinal performance.

Date: 2024-12
New Economics Papers: this item is included in nep-des, nep-mic and nep-spo
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