Effort maximization in asymmetric contest games with heterogeneous contestants

Jorg Franke, Christian Kanzow, Wolfgang Leininger, Alexandra Schwartz

Research output: Contribution to journalArticle

33 Citations (Scopus)

Abstract

Contest rules are set up by administrators who frequently have discretionary power in specifying the details of these rules, i. e., they can bias the contest rules toward specific contestants in order to further their prime objective. We derive the optimal bias of the contest rule for a contest administrator, who is interested in maximizing the total efforts expended in the contest. The solution is obtained in closed form for a widely used class of n-person contest games. Setting the optimal bias has important implications: (i) there is never exclusion of strong players, instead there is (endogenously induced) inclusion of weak contestants; (ii) the contest administrator will optimally level the playing field by encouraging weak contestants, but he will not equalize the contestants' chances unless they are identical; and (iii) at least three contestants will be active in equilibrium of the optimal contest, irrespective of heterogeneity.

Original languageEnglish
Pages (from-to)589-630
Number of pages42
JournalEconomic Theory
Volume52
Issue number2
DOIs
Publication statusPublished - 2013

Keywords

  • Contest design
  • Contest theory
  • Level playing field

ASJC Scopus subject areas

  • Economics and Econometrics

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