The effort-maximizing contest with heterogeneous prizes

We establish the effort-maximizing rule of allocating heterogeneous prizes when contestants privately observe their effort efficiencies. With ex ante symmetric players and increasing virtual effort efficiency, an all pay auction maximizes the total expected effort. •We study effort-maximizing contes...

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Bibliographic Details
Published inEconomics letters Vol. 125; no. 3; pp. 422 - 425
Main Authors Liu, Xuyuan, Lu, Jingfeng
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.12.2014
Elsevier Science Ltd
Subjects
All pay auction
Athletes
Auctions
Economic efficiency
Game theory
Grand contest
Pay
Resource allocation
Split contest
Studies
Subcontest
Virtual effort of efficiency
Grand contest
All pay auction
Split contest
Subcontest
D44
Virtual effort of efficiency
D72
D82
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Summary:We establish the effort-maximizing rule of allocating heterogeneous prizes when contestants privately observe their effort efficiencies. With ex ante symmetric players and increasing virtual effort efficiency, an all pay auction maximizes the total expected effort. •We study effort-maximizing contest design with heterogeneous prizes.•Contestants’ effort efficiencies are their private information.•An all pay auction maximizes expected total effort under regularity condition.•Any division of a grand contest leads to lower expected total effort.•An increasing return to scale effect prevails in all pay auctions.
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ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2014.10.026