Dynamic Difference‐Form Contests

This study presents a multistage contest designed by an organizer who chooses the (indivisible) winner prize together with the ranking scheme. When the organizer's objective is to maximize efforts, the optimal ranking scheme that selects the prize recipient coincides with a version of the piecewise linear difference‐form success function postulated by Che and Gale (2000). Even if the organizer's objective is not necessarily to maximize agents' effort, a noisy ranking of the difference‐form remains optimal.