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The Optimal Rewards in Contests

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Author Info

  • Chen Cohen

    (Department of Economics, Ben-Gurion University of the Negev, Israel.)

  • Todd R. Kaplan

    (Department of Economics, University of Exeter)

  • Aner Sela

    (Department of Economics, Ben-Gurion University of the Negev, Israel.)

Abstract

We study all-pay contests under incomplete information where the reward is a function of the contestant's type and also of his effort. We analyze 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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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP0402.pdf
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Bibliographic Info

Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0402.

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Date of creation: Oct 2004
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Handle: RePEc:exe:wpaper:0402

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Related research

Keywords: Contests; All-Pay Auctions; Optimal Design.;

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