Template-Type: ReDIF-Paper 1.0
Title: Contest With Incomplete Information: When to Turn up the Heat, and How?
Author-Name: Mengxi Zhang
Author-Email: mzhang@uni-bonn.de

Classification-JEL: 
Keywords: 

Abstract: I investigate the optimal design of contests when contestants have both private infor-
mation and convex effort costs. The designer has a fixed prize budget and her objective
is to maximize the expected total effort. I first demonstrate that it is always optimal
for the designer to employ a static, grand all-pay-contest with as many as possible
participants. In addition, I identify a sufficient and necessary condition for the winner-
takes-all prize structure to be optimal. When this condition fails, the designer may
prefer to award multiple prizes of descending sizes. I also provide a characterization
of the optimal prize structure for this case. Lastly, I illustrate how the optimal prize
structure evolves as contest size grows: the prize structure first becomes more unequal
until the optimal level of competition intensity is obtained, and then becomes less
unequal to maintain the optimal intensity.

Note: 
Length: 37
Creation-Date: 2020-02
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp156
Handle: RePEc:bon:boncrc:CRCTR224_2020_156