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Optimal Contest Design, Closeness and the Contest Success Function
Vol. 129, No. 1/2 (Oct., 2006), pp. 217-231
Published by: Springer
Stable URL: http://www.jstor.org/stable/25487587
Page Count: 15
You can always find the topics here!Topics: Revenue, Closing costs, Rent seeking behavior, Disabilities, Cost efficiency, Contests, Economic models, Design analysis, Economic regulation, Unit costs
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This paper considers the optimal design of an asymmetric two-player contest when the designer's payoff depends not only on performance of the contestants, but also on the closeness of the contest measured by the difference in winning probabilities. In contrast to previous studies, the impact of closeness on the optimal prize depends on the shape of the contest success function. Furthermore, including closeness in the designer's objective may induce the designer to uniformly increase the contestants' effort costs. A similar result is obtained in case the designer may handicap the stronger contestant, but an even contest is never optimal.
Public Choice © 2006 Springer