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Competitive balance: Information disclosure and discrimination in an asymmetric contest

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  • Clark, Derek J.
  • Kundu, Tapas

Abstract

We study a design problem for an effort-maximizing principal in a two-player contest with two dimensions of asymmetry. Players have different skill levels and an information gap exists, as only one player knows the skill difference. The principal has two policy instruments to redress the lack of competitive balance due to asymmetry; she can commit to an information-disclosing mechanism, and she can discriminate one of the players by biasing his effort. We characterize the optimal level of discrimination to maximize aggregate effort, showing how this inextricably determines the choice of information disclosure. Applications are found in newcomer-incumbent situations in an internal labor market, sales-force management, and research contests.

Suggested Citation

  • Clark, Derek J. & Kundu, Tapas, 2021. "Competitive balance: Information disclosure and discrimination in an asymmetric contest," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 178-198.
    • Handle: RePEc:eee:jeborg:v:184:y:2021:i:c:p:178-198
    DOI: 10.1016/j.jebo.2021.01.034
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric contest; Information design; Discrimination;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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