Template-Type: ReDIF-Paper 1.0
Title: Optimal Contests with Incomplete Information and Convex Effort Costs
Author-Name: Mengxi Zhang
Author-Email: mzhang@uni-bonn.de

Classification-JEL: 
Keywords: 

Abstract: I investigate the design of effort-maximizing mechanisms when agents have both private
information and convex effort costs, and the designer has a fixed prize budget. I first
demonstrate that it is always optimal for the designer to utilize a contest with as
many participants as possible. Further, I identify a necessary and sufficient 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 allocation rule for this case. Finally, I illustrate
how the optimal prize distribution evolves as the contest size grows.

Note: 
Length: 43
Creation-Date: 2023-04
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp156
Handle: RePEc:bon:boncrc:CRCTR224_2023_156v2