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|Title:||The optimal multi-stage contest|
|Authors:||Fu, Q. |
|Citation:||Fu, Q., Lu, J. (2012). The optimal multi-stage contest. Economic Theory 51 (2) : 351-382. ScholarBank@NUS Repository. https://doi.org/10.1007/s00199-009-0463-z|
|Abstract:||This paper investigates the optimal (effort-maximizing) structure of multi-stage sequential-elimination contests. We allow the contest organizer to design the contest structure using two instruments: contest sequence (the number of stages, and the number of contestants remaining after each stage), and prize allocation. When the contest technology is sufficiently noisy, we find that multi-stage contests elicit more effort than single-stage contests. For concave and moderately convex impact functions, the contest organizer should allocate the entire prize purse to a single final prize, regardless of the contest sequence. Additional stages always increase total effort. Therefore, the optimal contest eliminates one contestant at each stage until the finale when a single winner obtains the entire prize purse. Our results thus rationalize various forms of multi-stage contests that are conducted in the real world. © 2009 Springer-Verlag.|
|Source Title:||Economic Theory|
|Appears in Collections:||Staff Publications|
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