IDEAS home Printed from https://ideas.repec.org/p/exe/wpaper/0402.html
   My bibliography  Save this paper

The Optimal Rewards in Contests

Author

Listed:
  • Chen Cohen

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

  • Todd R. Kaplan

    (Department of Economics, University of Exeter)

  • Aner Sela

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

Abstract

We study all-pay contests under incomplete information where the reward is a function of the contestant's type and also of his effort. We analyze the optimal reward for the designer when the reward is either multiplicatively separable or additively separable in effort and type. In the multiplicatively separable environment the optimal reward is always positive while in the additively separable environment it may also be negative. In both environments, depending on the designer's utility, the optimal reward may either increase or decrease in the contestants' effort. Finally, in both environments, the designer's payoff depends only upon the expected value of the effort-dependent rewards and not the number of rewards.

Suggested Citation

  • Chen Cohen & Todd R. Kaplan & Aner Sela, 2004. "The Optimal Rewards in Contests," Discussion Papers 0402, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:0402
    as

    Download full text from publisher

    File URL: https://exetereconomics.github.io/RePEc/dpapers/DP0402.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kaplan, Todd, et al, 2002. "All-Pay Auctions with Variable Rewards," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 417-430, December.
    2. 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.
    3. Todd R. Kaplan & David Wettstein, 2006. "Caps on Political Lobbying: Comment," American Economic Review, American Economic Association, vol. 96(4), pages 1351-1354, September.
    4. Kaplan, Todd R. & Luski, Israel & Wettstein, David, 2003. "Innovative activity and sunk cost," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1111-1133, October.
    5. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-294, March.
    6. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-651, June.
    7. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
    8. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-890, September.
    9. Todd Kaplan & Israel Luski & Aner Sela & David Wettstein, 2002. "All–Pay Auctions with Variable Rewards," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 417-430, December.
    10. Barut, Yasar & Kovenock, Dan, 1998. "The symmetric multiple prize all-pay auction with complete information," European Journal of Political Economy, Elsevier, vol. 14(4), pages 627-644, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    2. Subhasish M. Chowdhury & Patricia Esteve‐González & Anwesha Mukherjee, 2023. "Heterogeneity, leveling the playing field, and affirmative action in contests," Southern Economic Journal, John Wiley & Sons, vol. 89(3), pages 924-974, January.
    3. Ron Seigel, 2009. "Asymmetric Contests with Conditional Investments," Levine's Working Paper Archive 814577000000000201, David K. Levine.
    4. Reut Megidish & Aner Sela, 2013. "Allocation of Prizes in Contests with Participation Constraints," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 713-727, December.
    5. Aner Sela, 2016. "Two Stage Contests With Effort-Dependent Rewards," Working Papers 1612, Ben-Gurion University of the Negev, Department of Economics.
    6. Konrad, Kai A., 2007. "Strategy in contests: an introduction [Strategie in Turnieren – eine Einführung]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, WZB Berlin Social Science Center.
    7. Johannes Münster, 2007. "Contests with investment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 849-862.
    8. Münster, Johannes, 2006. "Contests with Investment," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 120, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Münster, Johannes, 2006. "Contests with investment [Wettkämpfe mit Investitionen]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2006-09, WZB Berlin Social Science Center.
    10. Pavel Kireyev, 2016. "Markets for Ideas: Prize Structure, Entry Limits, and the Design of Ideation Contests," Harvard Business School Working Papers 16-129, Harvard Business School.
    11. Marco Faravelli, 2011. "The Important Thing Is Not (Always) Winning but Taking Part: Funding Public Goods with Contests," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(1), pages 1-22, February.
    12. Joao Montez & Nicolas Schutz, 2021. "All-Pay Oligopolies: Price Competition with Unobservable Inventory Choices [Extremal Equilibria of Oligopolistic Supergames]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(5), pages 2407-2438.
    13. Deng, Shanglyu & Fu, Qiang & Wu, Zenan & Zhu, Yuxuan, 0. "Contests with sequential entry and incomplete information," Theoretical Economics, Econometric Society.
    14. Yizhaq Minchuk & Aner Sela, 2020. "Contests with insurance," Review of Economic Design, Springer;Society for Economic Design, vol. 24(1), pages 1-22, June.
    15. Aner Sela, 2002. "Contest Architecture (jointly with Benny Moldovanu)," Theory workshop papers 357966000000000088, UCLA Department of Economics.
    16. Pastine, Tuvana & Pastine, Ivan, 2006. "Politician Preferences and Caps on Political Lobbying," CEPR Discussion Papers 5913, C.E.P.R. Discussion Papers.
    17. Benny Moldovanu & Aner Sela & Xianwen Shi, 2012. "Carrots And Sticks: Prizes And Punishments In Contests," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 453-462, April.
    18. E. Feess & Gerd Muehlheusser & M. Walzl, 2008. "Unfair contests," Journal of Economics, Springer, vol. 93(3), pages 267-291, April.
      • Feess, E. & Muehlheusser, G. & Walzl, M., 2004. "Unfair contests," Research Memorandum 048, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    19. Ivan Pastine & Tuvana Pastine, 2009. "Caps on Political Contributions, Monetary Penalties and Politician Preferences," Working Papers 200912, School of Economics, University College Dublin.
    20. Aner Sela, 2017. "Two-stage contests with effort-dependent values of winning," Review of Economic Design, Springer;Society for Economic Design, vol. 21(4), pages 253-272, December.

    More about this item

    Keywords

    Contests; All-Pay Auctions; Optimal Design.;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:exe:wpaper:0402. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sebastian Kripfganz (email available below). General contact details of provider: https://edirc.repec.org/data/deexeuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.