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Microfounded Contest Design

Rene Kirkegaard ()

No 2003, Working Papers from University of Guelph, Department of Economics and Finance

Abstract: This paper examines a unifying model of contests that distinguishes between unobservable actions and observable but noisy performance. Special versions of the model have been used to provide microfoundations for the popular generalized lottery contest success function. However, extensions to contests with exogenous or endogenous biases have strayed from the microfoundations. Consequently, biases and design instruments have been modelled in ad hoc and poorly founded ways. Here, starting directly from the stochastic-performance foundation, internally consistent and fully optimal contests are derived from first principles. The problem resembles a contracting problem. The optimally designed contest is not a generalized lottery contest.

Keywords: Contest design; Generalized lottery contests; Stochastic performance contests; Team moral hazard; Tournaments; Tullock contests. (search for similar items in EconPapers)
JEL-codes: C72 D72 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2020
New Economics Papers: this item is included in nep-cta, nep-mic and nep-ore
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