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Using a Simple Contest to Illustrate Mechanism Design

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  • Calvin Blackwell

Abstract

This article describes a simple classroom activity that illustrates how economic theory can be used for mechanism design. The rules for a set of contests are presented; the results typically obtained from these contests illustrate how the prize structure can be manipulated in order to produce a particular outcome. Specifically, this activity is designed to show how changing the prize structure can impact both the contestants’ average efforts and the effort level of the hardest-working contestant. The activity can be run in a 50-minute class, has instructions that fit on a single piece of paper, and, although it can be run in large classes, requires only six students.

Suggested Citation

  • Calvin Blackwell, 2011. "Using a Simple Contest to Illustrate Mechanism Design," The Journal of Economic Education, Taylor & Francis Journals, vol. 42(4), pages 375-387, October.
    • Handle: RePEc:taf:jeduce:v:42:y:2011:i:4:p:375-387
    DOI: 10.1080/00220485.2011.606088
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    References listed on IDEAS

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    1. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
    2. Roger B. Myerson, 2008. "Perspectives on Mechanism Design in Economic Theory," American Economic Review, American Economic Association, vol. 98(3), pages 586-603, June.
    3. Szymanski, Stefan & Valletti, Tommaso M., 2005. "Incentive effects of second prizes," European Journal of Political Economy, Elsevier, vol. 21(2), pages 467-481, June.
    4. Eric S. Maskin, 2008. "Mechanism Design: How to Implement Social Goals," American Economic Review, American Economic Association, vol. 98(3), pages 567-576, June.
    5. Leonid Hurwicz, 2008. "But Who Will Guard the Guardians?," American Economic Review, American Economic Association, vol. 98(3), pages 577-585, June.
    6. Jennifer Brown, 2011. "Quitters Never Win: The (Adverse) Incentive Effects of Competing with Superstars," Journal of Political Economy, University of Chicago Press, vol. 119(5), pages 982-1013.
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