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Performance-maximizing large contests

Author

Listed:
  • Olszewski, Wojciech

    (Department of Economics, Northwestern University)

  • Siegel, Ron

    (Department of Economics, The Pennsylvania State University)

Abstract

Many sales, sports, and research contests are put in place to maximize contestants’ performance. We investigate and provide a complete characterization of the prize structures that achieve this objective in settings with many contestants. The contestants may be ex-ante asymmetric in their abilities and prize valuations, and there may be complete or incomplete information about these parameters. The prize valuations and performance costs may be linear, concave, or convex. A main novel takeaway is that awarding numerous different prizes whose values gradually decline with contestants’ ranking is optimal in the typical case of contestants with convex performance costs and concave prize valuations. This suggests that many real-world contests can be improved by increasing the number of prizes and making them more heterogeneous. The techniques we develop can also be used to formulate and solve other contest design questions that have so far proven intractable.

Suggested Citation

  • Olszewski, Wojciech & Siegel, Ron, 2020. "Performance-maximizing large contests," Theoretical Economics, Econometric Society, vol. 15(1), January.
    • Handle: RePEc:the:publsh:3588
    as

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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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