Heterogeneous Outside Options in Contests
12 Pages Posted: 3 Apr 2014
Date Written: April 2, 2014
This article describes a large number of contestants with high and low talent who individually decide to enter a contest or take their heterogeneous outside options. We derive a critical condition for which only high types, only low types, or both types participate in the contest. If a contest organizer worries about the participating type in the contest then he/she should provide a contest with low noise to attract high types. However, if a contest organizer's objective is to maximize the individual effort he/she does not necessarily prefer the high types in the contest.
Keywords: contest, aggregate taking behavior, outside option
JEL Classification: C72, D43, D72, L13
Suggested Citation: Suggested Citation