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Allocation Of Prizes In Contests With Participation Constraints

Author

Listed:
  • Aner Sela

    () (Department of Economics, Ben-Gurion University of the Negev, Israel)

  • Reut Megidish

    () (Ben-Gurion University of the Negev, Israel)

Abstract

We study all-pay contests with an exogenous minimal effort constraint where a player can participate in a contest only if his effort (output) is equal to or higher than the minimal effort constraint. Contestants are privately informed about a parameter (ability) that affects their cost of effort. The designer decides about the size and the number of prizes. We analyze the optimal prize allocation for the contest designer who wishes to maximize either the total effort or the highest effort. It is shown that if the minimal effort constraint is relatively high, the winner-take-all contest in which the contestant with the highest effort wins the entire prize sum does not maximize the expected total effort nor the expected highest effort. In that case, the random contest in which the entire prize sum is equally allocated to all the participants yields a higher expected total effort as well as a higher expected highest effort than the winner-take-all contest.

Suggested Citation

  • Aner Sela & Reut Megidish, 2010. "Allocation Of Prizes In Contests With Participation Constraints," Working Papers 1008, Ben-Gurion University of the Negev, Department of Economics.
  • Handle: RePEc:bgu:wpaper:1008
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    File URL: http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/1008.pdf
    File Function: First version, 2010
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    References listed on IDEAS

    as
    1. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-651, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Winner-take-all contests; all-pay auctions; participation constraints.;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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