Optimal Feedback in Contests

Luis Rayo, Jeffrey Ely, George Georgiadis and Sina Khorasani

No 16308, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We derive an optimal dynamic contest for environments where the principal monitors effort through a coarse, binary performance measure and chooses prize-allocation and termination rules together with a real-time feedback policy. The optimal contest takes a stark cyclical form: contestants are kept fully apprised of their own successes, and at the end of each fixed-length cycle, if at least one agent has succeeded, the contest ends and the prize is shared equally among all successful agents regardless of when they succeeded; otherwise, the designer informs all contestants that nobody has yet succeeded and the contest resets.

Date: 2021-06
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