The beauty of "bigness": On optimal design of multi-winner contests
This paper examines the variation in total effort expended by participants when prizes are awarded in a grand contest as opposed to a number of subcontests. When contestants are homogeneous, under a mild and plausible condition (regular contest technology), a grand contest generates more effort than any set of subcontests. When no restrictions are placed on the contest technology, the results further demonstrate an "increasing-return-to-scale" property such that each individual responds to a proportional increase in the number of contestants and the number of each prize by increasing individual effort. Therefore, when a collection of identical subcontests forms a grand contest, the total effort always increases and the grand contest leads to a higher rent-dissipation rate. Our results apply to a wide variety of competitive activities, such as high-profile sports (e.g., diving and gymnastics in the Olympic Games), the internal labor market and the "quota" system for public resource allocation.
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