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Competitive problem solving and the optimal prize schemes

  • Suzuki, Toru

Agents compete to solve a problem. Each agent simultaneously chooses either a safe method or a risky method to solve the problem. This paper analyzes a prize scheme as an incentive to induce the optimal risk-taking level which maximizes the designerʼs interest. It is shown that whenever the winner-take-all scheme induces excessive risk-taking, there exists a prize scheme which induces the optimal risk-taking. Moreover, the existence of such a prize scheme is guaranteed if the number of competitors is sufficiently large.

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File URL: http://www.sciencedirect.com/science/article/pii/S0899825612000371
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 75 (2012)
Issue (Month): 2 ()
Pages: 1009-1013

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Handle: RePEc:eee:gamebe:v:75:y:2012:i:2:p:1009-1013
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Moldovanu, Benny & Sela, Aner, 2002. "Contest Architecture," Sonderforschungsbereich 504 Publications 02-06, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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  8. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  9. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
  10. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-90, September.
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