Why the Olympics have three prizes and not just one
AbstractThere are at least two reasons why multiple prizes can be optimal in symmetric imperfectly discriminating contests. First, the introduction of multiple prizes reduces the standard deviation of contestants’ effort in asymmetric equilibria, when the majority of contestants actively participate in competition. Second, the introduction of multiple prizes may increase the aggregate (average) effort contributed in the contest. When more of a total prize fund is shifted away from the first prize, on the one hand, the active contestants obtain an incentive to reduce their individual effort, but, on the other hand, the number of active contestants may increase. Therefore, the aggregate (average) effort may increase when the number of active contestants in equilibrium increases.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 200.
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symmetric contest; imperfectly discriminating contest; logit; asymmetric equilibria; prize structure; sport;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
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