Harnessing Beliefs to Stimulate Efforts
47 Pages Posted: 16 Nov 2015 Last revised: 4 Oct 2018
Date Written: September 25, 2017
A contestant's effort depends on her knowledge of her rival's type. This knowledge is often limited in real-life contests. I propose a model where the principal of a contest has commitment power to verifiably disclose contestants' types. What is the optimal disclosure policy to stimulate contestants' efforts? Full disclosure spurs more (less) efforts than full concealment if the distribution of types is skewed towards high (low) types. However, if the principal can also partially disclose types, both full disclosure and full concealment are outperformed by a particular form of partial disclosure, regardless of the skewness of the distribution of types; this is achieved by disclosing the signal which is best for the principal (i.e. all contestants are high types) and concealing the rest.
Keywords: Contests, Information Disclosure, Strategic Complements and Substitutes, Skewness
JEL Classification: C72, C82, D82
Suggested Citation: Suggested Citation