Designing an optimal contest |
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Authors: | Ani Dasgupta Kofi O Nti |
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Institution: | Smeal College of Business Administration. Penn State University, University Park, PA 16802, USA |
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Abstract: | The paper brings a mechanism design perspective to the study of contests. We consider the problem of selecting a contest success function when the contest designer may also value the prize. We show that any equilibrium outcome that can be achieved by a concave increasing contest success function can be replicated by a linear contest success function. An expected utility maximizing designer should employ a linear homogeneous contest success function. We explicitly derive the optimal contest for a risk-neutral designer and present comparative statics results. Tullock's contest is optimal only when the designer's valuation for the prize is low. |
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Keywords: | Contest design Optimal contest Rent-seeking Mechanism design |
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