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Optimal Prizes in Dynamic Elimination Contests: An Experimental Analysis

Rudi Stracke, Wolfgang Höchtl (), Rudolf Kerschbamer and Uwe Sunde

No 1208, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: This paper investigates the effects of different prize structures on the effort choices of participants in two-stage elimination contests. A format with a single prize is shown to maximize totaleffort over both stages, but induces low effort in stage 1 and high effort in stage 2. By contrast, a format that allocates the same total amount to multiple prizes in such a way that the predicted effort remains constant across stages yields lower total effort provision. Experimental evidence suggests that (i) total effort is higher in the single prize format, but only for risk-neutral subjects; (ii) effort is constant across stages in the format with multiple prizes, independently of risk-attitudes; and (iii) the runner-up prize in the multiple prize format increases stage-1 and decreases stage-2 efforts in line with the theoretical prediction.

Keywords: Dynamic Contests; Multiple Prizes; Experiment; Over-provision (search for similar items in EconPapers)
JEL-codes: C72 D72 J33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-03
New Economics Papers: this item is included in nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Optimal Prizes in Dynamic Elimination Contests: An Experimental Analysis (2013) Downloads
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