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Title: Essays on Contests Design with Stochastic Entry and Information Disclosure
Authors: JIAO QIAN
Keywords: Contests design, Stochastic Entry, Stochastic Abilities, Disclosure Policy
Issue Date: 8-Aug-2011
Citation: JIAO QIAN (2011-08-08). Essays on Contests Design with Stochastic Entry and Information Disclosure. ScholarBank@NUS Repository.
Abstract: This thesis contains three essays on optimal contests design with stochastic entry and information disclosure. The first two chapters study imperfectly discriminatory contests with stochastic entries. Under the assumption that a fixed pool of potential bidders can enter a contest to compete for an indivisible prize, chapter 1 explores how a contest organizer who seeks to maximize participant effort should disclose the information on the actual number of contestants, when each potential contestant has a fixed probability of entering the contest. In a setting with risk neutral contestants, the optimal disclosure policy depends crucially on the properties of the characteristic function. The contest organizer prefers full disclosure (full concealment) if the characteristic function is strictly concave (strictly convex). However, the expected equilibrium effort is independent of the prevailing information disclosure policy if Tullock Contest applies. Chapter 2 differs from chapter 1 in the sense that the probability of entry is endogenous. Each bidder incurs an irreversible fixed cost if he decides to enter. After entering, the bidders then bid for the prize. This setting leads to a two-dimensional discontinuous game (Dasgupta and Maskin, 1986). I establish that a symmetric equilibrium exists in the entry-bidding game and further identify the conditions for the existence (non-existence) of a symmetric equilibrium with pure-strategy bidding after entry. Based on the equilibrium result, three main issues about optimal contest design are explored: (i) the optimal level of accuracy of the winner selection mechanism (the proper size of r in Tullock contests); (ii) the efficiency implications of shortlisting and exclusion; and (iii) the optimal disclosure policy. Chapter 3 investigates information disclosure in a perfectly discriminating contest. Assume the private abilities of the contestants are stochastic and they are observed by the contest organizer who decides whether to disclose this information publicly. The organizer may care about total effort or rent dissipation. I find that concealing the abilities of the contestants elicits higher expected total effort, regardless of the distribution of the abilities. By way of contrast, rent dissipation rate does not depend on the disclosure policy. This finding is robust in a setting with multiple prizes as long as effort cost function is linear. And also robust in generalized settings with endogenous distribution of abilities and endogenous entry of contestants. However, when the cost function is nonlinear, the organizer may prefer disclosure.
Appears in Collections:Ph.D Theses (Open)

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