American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Contest Design with Stochastic Performance
American Economic Journal: Microeconomics
vol. 15,
no. 1, February 2023
(pp. 201–38)
Abstract
This paper studies optimal contest design in contests with noisy performance. Here, contest design is a team moral hazard problem that endogenizes the assignment rule that maps performance profiles into winning probabilities. The optimal design features endogenous standards for eligibility, and the number of prizes that are awarded may be stochastic. Generally, one group of agents is identified as "first claimants" of prizes, contingent on performance exceeding a threshold of excellence. However, which group wins prizes more often depends on the designer's objective function and the performance technologies. Finally, the approach derives endogenous, microfounded, and fully optimal contest success functions.Citation
Kirkegaard, René. 2023. "Contest Design with Stochastic Performance." American Economic Journal: Microeconomics, 15 (1): 201–38. DOI: 10.1257/mic.20200422Additional Materials
JEL Classification
- D44 Auctions
- D82 Asymmetric and Private Information; Mechanism Design
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