Information Favoritism and Scoring Bias in Contests

Shanglyu Deng, Hanming Fang, Qiang Fu and Zenan Wu

No 31036, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Two potentially asymmetric players compete for a prize of common value, which is initially unknown, by exerting efforts. A designer has two instruments for contest design. First, she decides whether and how to disclose an informative signal of the prize value to players. Second, she sets the scoring rule of the contest, which varies the relative competitiveness of the players. We show that the optimum depends on the designer’s objective. A bilateral symmetric contest—in which information is symmetrically distributed and the scoring bias is set to offset the initial asymmetry between players—always maximizes the expected total effort. However, the optimal contest may deliberately create bilateral asymmetry—which discloses the signal privately to one player, while favoring the other in terms of the scoring rule—when the designer is concerned about the expected winner’s effort. The two instruments thus exhibit complementarity, in that the optimum can be made asymmetric in both dimensions even if the players are ex ante symmetric. Our results are qualitatively robust to (i) affiliated signals and (ii) endogenous information structure. We show that information favoritism can play a useful role in addressing affirmative action objectives.

JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Date: 2023-03
New Economics Papers: this item is included in nep-gth, nep-mic and nep-spo
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Working Paper: Information Favoritism and Scoring Bias in Contests (2023)
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