Orchestrating Contests with Heterogeneous Participants
This paper compares static one-stage and dynamic two-stage contests with heterogeneous participants. I find that aggregate effort provision (AEP) is strictly higher in the dynamic than in the static format in any interior equilibrium with heterogeneous contestants. Since AEP is identical in both formats in case of homogeneity, this finding suggests that the well-known (adverse) incentive effect of heterogeneity crucially depends on the structure of the competition – the effect is lower in dynamic than in static formats. The paper also shows that heterogeneity between contestants is crucial to explain recent empirical evidence on the comparison of different contest structures.
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- O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
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Keele Economics Research Papers
KERP 2002/22, Centre for Economic Research, Keele University.
- Jennifer Brown, 2011. "Quitters Never Win: The (Adverse) Incentive Effects of Competing with Superstars," Journal of Political Economy, University of Chicago Press, vol. 119(5), pages 982 - 1013.
- Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
- Höchtl, Wolfgang & Kerschbamer, Rudolf & Stracke, Rudi & Sunde, Uwe, 2011. "Incentives vs. Selection in Promotion Tournaments: Can a Designer Kill Two Birds with One Stone?," IZA Discussion Papers 5755, Institute for the Study of Labor (IZA).
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