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Fighting for Lemons: The Encouragement Effect in Dynamic Contests with Private Information

Juan Beccuti () and Marc M Ller
Authors registered in the RePEc Author Service: Marc Möller ()

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: This paper proposes a tractable model of a dynamic contest where players have private information about the contest s prize. We show that private information helps to encourage players who have fallen behind, leading to an increase in aggre- gate incentives. We derive the optimal information design for a designer interested in the maximization of aggregate effort. Optimal signals turn out to be private and imperfectly informative and aim to level the playing field at any stage of the dynamic interaction.

Keywords: Dynamic contests; discouragement effect; information design (search for similar items in EconPapers)
JEL-codes: C72 D72 D82 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp2017

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