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Optimal Rewards in Contests

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  • Cohen, Chen
  • Kaplan, Todd
  • Sela, Aner

Abstract

We study all-pay contests under incomplete information where the reward is a function of the contestant's type and effort. We analyse the optimal reward for the designer when the reward is either multiplicatively separable or additively separable in effort and type. In the multiplicatively separable environment the optimal reward is always positive while in the additively separable environment it may also be negative. In both environments, depending on the designer's utility, the optimal reward may either increase or decrease in the contestants' effort. Finally, in both environments, the designer's payoff depends only upon the expected value of the effort-dependent rewards and not the number of rewards.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4704.

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Date of creation: Oct 2004
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Handle: RePEc:cpr:ceprdp:4704

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Keywords: all-pay auctions; contests; optimal design;

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Cited by:
  1. Jönsson, Stefan & Schmutzler, Armin, 2013. "All-Pay Auctions: Implementation and Optimality," CEPR Discussion Papers 9323, C.E.P.R. Discussion Papers.
  2. Hoffmann, Magnus & Rota-Graziosi, Grégoire, 2012. "Endogenous timing in general rent-seeking and conflict models," Games and Economic Behavior, Elsevier, vol. 75(1), pages 168-184.
  3. Aner Sela, 2012. "Sequential two-prize contests," Economic Theory, Springer, vol. 51(2), pages 383-395, October.
  4. 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.
  5. 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.
  6. BOS, Olivier & RANGER, Martin, 2009. "All-pay auctions with endogenous rewards," CORE Discussion Papers 2009059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Sela, Aner, 2008. "Sequential Two-Prize Contests," CEPR Discussion Papers 6769, C.E.P.R. Discussion Papers.
  8. Kaplan, Todd R & Zamir, Shmuel, 2014. "Advances in Auctions," MPRA Paper 54656, University Library of Munich, Germany.
  9. 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.
  10. Aner Sela, 2008. "Sequential Two-Prize Contests," Working Papers 0803, Ben-Gurion University of the Negev, Department of Economics.
  11. Bos, Olivier & Ranger, Martin, 2013. "All-Pay Auctions with Polynomial Rewards," MPRA Paper 47587, University Library of Munich, Germany.

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