ALLOCATION OF PRIZES IN CONTESTS WITH PARTICIPATION CONSTRAINTS

Aner Sela and Reut Megidish ()
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Reut Megidish: Ben-Gurion University of the Negev, Israel

No 1008, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: We study all-pay contests with an exogenous minimal effort constraint where a player can participate in a contest only if his effort (output) is equal to or higher than the minimal effort constraint. Contestants are privately informed about a parameter (ability) that affects their cost of effort. The designer decides about the size and the number of prizes. We analyze the optimal prize allocation for the contest designer who wishes to maximize either the total effort or the highest effort. It is shown that if the minimal effort constraint is relatively high, the winner-take-all contest in which the contestant with the highest effort wins the entire prize sum does not maximize the expected total effort nor the expected highest effort. In that case, the random contest in which the entire prize sum is equally allocated to all the participants yields a higher expected total effort as well as a higher expected highest effort than the winner-take-all contest.

Keywords: Winner-take-all contests; all-pay auctions; participation constraints. (search for similar items in EconPapers)
JEL-codes: D44 O31 O32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2010
New Economics Papers: this item is included in nep-cdm and nep-cta
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http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/1008.pdf First version, 2010 (application/pdf)

Related works:
Journal Article: Allocation of Prizes in Contests with Participation Constraints (2013)
Working Paper: Allocation of Prizes in Contests with Participation Constraints (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:1008

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