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Optimal rewards in contests

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  • Chen Cohen
  • Todd R. Kaplan
  • Aner Sela

Abstract

We study all-pay contests with effort-dependent rewards under incomplete information. A contestant's value to winning depends not only on his type but also on the effort-dependent reward chosen by the designer. We analyze which reward is optimal for the designer when his objective is either total effort or highest effort. We find that under certain conditions the optimal reward may either be negative or even decreasing in effort; however, we find no advantage to having multiple rewards. Copyright (c) 2008, RAND.

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Bibliographic Info

Article provided by RAND Corporation in its journal The RAND Journal of Economics.

Volume (Year): 39 (2008)
Issue (Month): 2 ()
Pages: 434-451

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Handle: RePEc:bla:randje:v:39:y:2008:i:2:p:434-451

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Cited by:
  1. Gershkov, Alex & Li, Jianpei & Schweinzer, Paul, 2006. "Collective Production and Incentives," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 186, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Aner Sela, 2012. "Sequential two-prize contests," Economic Theory, Springer, vol. 51(2), pages 383-395, October.
  3. Grégoire ROTA-GRAZIOSI & Magnus HOFFMANN, 2010. "Endogenous Timing in General Rent‐Seeking and Conflict Models," Working Papers 201024, CERDI.
  4. Kaplan, Todd & Wettstein, David, . "The Optimal Design of Rewards in Contests," Working Papers WP2010/6, University of Haifa, Department of Economics, revised 22 Nov 2010.
  5. Sela, Aner, 2008. "Sequential Two-Prize Contests," CEPR Discussion Papers 6769, C.E.P.R. Discussion Papers.
  6. Stefan Jönsson & Armin Schmutzler, 2013. "All-pay auctions: Implementation and optimality," ECON - Working Papers 108, Department of Economics - University of Zurich.
  7. Fu, Qiang & Lu, Jingfeng & Lu, Yuanzhu, 2012. "Incentivizing R&D: Prize or subsidies?," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 67-79.
  8. Aner Sela, 2008. "Sequential Two-Prize Contests," Working Papers 0803, Ben-Gurion University of the Negev, Department of Economics.
  9. Bos, Olivier & Ranger, Martin, 2013. "All-Pay Auctions with Polynomial Rewards," MPRA Paper 47587, University Library of Munich, Germany.

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