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Competition for a Prize

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  • Rob van der Noll

    ()
    (CPB Netherlands Bureau for Economic Policy Analysis, and Erasmus Universiteit Rotterdam)

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    Abstract

    I present a model in which individuals compete for a prize by choosing to apply or not. Abilities are private information and in attempt to select the best candidate, the committee compares applicants with an imperfect technology. The choice of application cost, size of the prize and use of information technology are being characterized. In equilibrium, the number of applicants is stochastic and may overload the committee. I show that in spite of overload, the optimal cost (size of the prize) is decreasing (increasing) in market size. Furthermore I show when having a perfect information technology is not optimal.

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    File URL: http://papers.tinbergen.nl/06013.pdf
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    Bibliographic Info

    Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-013/1.

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    Date of creation: 20 Jan 2006
    Date of revision:
    Handle: RePEc:dgr:uvatin:20060013

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    Web page: http://www.tinbergen.nl

    Related research

    Keywords: asymmetric information; beauty contest design; award competition; information overload;

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    References

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    1. Stefano Ficco, 2004. "Information Overload in Monopsony Markets," Tinbergen Institute Discussion Papers 04-082/1, Tinbergen Institute.
    2. John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
    3. Hvide, Hans K. & Kristiansen, Eirik G., 2003. "Risk taking in selection contests," Games and Economic Behavior, Elsevier, vol. 42(1), pages 172-179, January.
    4. Morgan, John, 2003. " Sequential Contests," Public Choice, Springer, vol. 116(1-2), pages 1-18, July.
    5. Taylor, Curtis R, 1999. "Time-on-the-Market as a Sign of Quality," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 555-78, July.
    6. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
    7. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
    8. Manelli, Alejandro M & Vincent, Daniel R, 1995. "Optimal Procurement Mechanisms," Econometrica, Econometric Society, vol. 63(3), pages 591-620, May.
    9. Maarten C. W. Janssen & José Luis Moraga-González, 2004. "Strategic Pricing, Consumer Search and the Number of Firms," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1089-1118, October.
    10. Maarten C.W. Janssen, 2002. "Catching hipos: screening, wages, and competing for a job," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 321-333, April.
    11. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
    12. David A. Maleug & Yongsheng Xu,, . "Endogenous Information Quality: A Job-Assignment Application," Discussion Papers 96/4, University of Nottingham, School of Economics.
    13. Clark, Derek J & Riis, Christian, 1998. "Competition over More Than One Prize," American Economic Review, American Economic Association, vol. 88(1), pages 276-89, March.
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