Competitive Problem Solving and the Optimal Prize Schemes
AbstractAgents compete to solve a problem. Each agent knows own computational capacity as private information and simultaneously chooses either a risky or a safe problem solving method. This paper analyzes the optimal prize schemes from the perspective of the prize designer who wishes to find a solution as quick as possible. It is shown that (i) the winner- take-all scheme can induce excessive risk taking and make problem solving slower (ii) prize schemes with milder competitive pressure induce the optimal risk taking and quicker problem solving.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-083.
Date of creation: 02 Dec 2010
Date of revision:
Optimal prize scheme; Risk taking; Problem solving;
Other versions of this item:
- Suzuki, Toru, 2012. "Competitive problem solving and the optimal prize schemes," Games and Economic Behavior, Elsevier, vol. 75(2), pages 1009-1013.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-CTA-2010-12-11 (Contract Theory & Applications)
- NEP-MIC-2010-12-11 (Microeconomics)
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