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Return on Investment in Contest

Author

Listed:
  • Yizhaq Minchuk

    (Industrial Engineering and Management Department, Shamoon College of Engineering)

  • Baruch Keren

    (Department of Industrial Engineering and Management, Shamoon College of Engineering)

  • Yossi Hadad

    (Department of Industrial Engineering and Management, Shamoon College of Engineering)

Abstract

This paper considers a contest with one organizer and two (or more) contestants that compete to win a prize that is set by the organizer (the winner takes all). In the first stage, the organizer determines the amount of money he needs to borrow in order to establish the prize of the contest. In the second stage, each contestant determines his efforts in the contest. The contest prize is determined according to the abilities of all the contestants and the cost of the loan. It is shown that if the organizer borrows the optimal amount of money for the prize, in some situations this setup can yield 100% return on investment (ROI).

Suggested Citation

  • Yizhaq Minchuk & Baruch Keren & Yossi Hadad, 2018. "Return on Investment in Contest," Economics Bulletin, AccessEcon, vol. 38(4), pages 2073-2078.
    • Handle: RePEc:ebl:ecbull:eb-18-00550
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2018/Volume38/EB-18-V38-I4-P191.pdf
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    More about this item

    Keywords

    Contest; Strategy; Return on investment;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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