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Optimal Feedback in Contests

Author

Listed:
  • Jeffrey C Ely
  • George Georgiadis
  • Sina Khorasani
  • Luis Rayo

Abstract

We obtain optimal dynamic contests for environments where the designer monitors effort through coarse, binary signals—Poisson successes—and aims to elicit maximum effort, ideally in the least amount of time possible, given a fixed prize. The designer has a vast set of contests to choose from, featuring termination and prize-allocation rules together with real-time feedback for the contestants. Every effort-maximizing contest (which also maximizes total expected successes) has a history-dependent termination rule, a feedback policy that keeps agents fully apprised of their own success, and a prize-allocation rule that grants them, in expectation, a time-invariant share of the prize if they succeed. Any contest that achieves this effort in the shortest possible time must in addition be what we call second chance: once a pre-specified number of successes arrive, the contest enters a countdown phase where contestants are given one last chance to succeed.

Suggested Citation

  • Jeffrey C Ely & George Georgiadis & Sina Khorasani & Luis Rayo, 2023. "Optimal Feedback in Contests," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(5), pages 2370-2394.
  • Handle: RePEc:oup:restud:v:90:y:2023:i:5:p:2370-2394.
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    File URL: http://hdl.handle.net/10.1093/restud/rdac074
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    Cited by:

    1. Name Correa, Alvaro J. & Yildirim, Huseyin, 2024. "Multiple prizes in tournaments with career concerns," Journal of Economic Theory, Elsevier, vol. 215(C).

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