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Competitive Problem Solving and the Optimal Prize Schemes

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  • Toru Suzuki

    () (Max Planck Institute of Economics, Jena)

Abstract

Agents compete to solve a problem. Each agent knows own computational capacity as private information and simultaneously chooses either a risky or a safe problem solving method. This paper analyzes the optimal prize schemes from the perspective of the prize designer who wishes to find a solution as quick as possible. It is shown that (i) the winner- take-all scheme can induce excessive risk taking and make problem solving slower (ii) prize schemes with milder competitive pressure induce the optimal risk taking and quicker problem solving.

Suggested Citation

  • Toru Suzuki, 2010. "Competitive Problem Solving and the Optimal Prize Schemes," Jena Economic Research Papers 2010-083, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2010-083
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    References listed on IDEAS

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    Cited by:

    1. Lorens Imhof & Matthias Kräkel, 2016. "Ex post unbalanced tournaments," RAND Journal of Economics, RAND Corporation, vol. 47(1), pages 73-98, February.

    More about this item

    Keywords

    Optimal prize scheme; Risk taking; Problem solving;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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