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Microfounded Contest Design

Author

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  • René Kirkegaard

    (Department of Economics and Finance, University of Guelph, Guelph ON Canada)

Abstract

This paper examines a unifying model of contests that distinguishes between unobservable actions and observable but noisy performance. Special versions of the model have been used to provide microfoundations for the popular generalized lottery contest success function. However, extensions to contests with exogenous or endogenous biases have strayed from the microfoundations. Consequently, biases and design instruments have been modelled in ad hoc and poorly founded ways. Here, starting directly from the stochastic-performance foundation, internally consistent and fully optimal contests are derived from first principles. The problem resembles a contracting problem. The optimally designed contest is not a generalized lottery contest.

Suggested Citation

  • René Kirkegaard, 2020. "Microfounded Contest Design," Working Papers 2003, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2020-03
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    File URL: http://www.uoguelph.ca/economics/repec/workingpapers/2020/2020-03.pdf
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    References listed on IDEAS

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    Cited by:

    1. Deng, Shanglyu & Fu, Qiang & Wu, Zenan, 2021. "Optimally biased Tullock contests," Journal of Mathematical Economics, Elsevier, vol. 92(C), pages 10-21.
    2. Spencer Bastani & Thomas Giebe & Oliver Gürtler, 2019. "A General Framework for Studying Contests," CESifo Working Paper Series 7993, CESifo.
    3. Bastani, Spencer & Giebe, Thomas & Gürtler, Oliver, 2022. "Simple equilibria in general contests," Games and Economic Behavior, Elsevier, vol. 134(C), pages 264-280.

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    More about this item

    Keywords

    Contest design; Generalized lottery contests; Stochastic performance contests; Team moral hazard; Tournaments; Tullock contests.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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