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Selecting contestants for a rent-seeking contest

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  • Jean-François Mercier

    (Loyola Marymount University)

Abstract

In this paper, a contest designer derives profits from aggregate effort exerted by the contestants. I develop a revelation mechanism that enables the contest designer to select a subset of contestants from a pool of candidates in a way that maximizes her profits, even though she is uninformed about the candidates’ valuations for the contest prize. I prove the existence of an incentive compatible and individually rational mechanism. I solve the designer’s problem by using a three-stage game. At Stage 0, the designer designs a mechanism. At Stage 1, candidates participate in the mechanism then a subset of candidates become contestants. Lastly, at Stage 2, information is revealed and the contestants participate in a contest. I show that the optimal size of a contest depends on contestants’ types, the cost of the prize to the designer and on the marginal cost that a contestant imposes on the designer. Contrary to models in which an entry fee s access to the contest, the designer can elicit truthful revelations by imposing revelation costs, and in turn is able to select the optimal subset of contestants.

Suggested Citation

  • Jean-François Mercier, 2018. "Selecting contestants for a rent-seeking contest," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(3), pages 927-947, September.
    • Handle: RePEc:spr:jogath:v:47:y:2018:i:3:d:10.1007_s00182-017-0610-x
    DOI: 10.1007/s00182-017-0610-x
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    References listed on IDEAS

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    2. Kjell Hausken, 2021. "Axiomatizing additive multi-effort contests," SN Business & Economics, Springer, vol. 1(11), pages 1-12, November.

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