Discrimination in a Model of Contests with Incomplete Information About Ability

34 Pages Posted: 10 Aug 2016

See all articles by David Pérez‐Castrillo

David Pérez‐Castrillo

Autonomous University of Barcelona

David Wettstein

Ben-Gurion University of the Negev

Date Written: August 2016

Abstract

We study contests with private information and identical contestants, where contestants' efforts and innate abilities generate output of varying qualities. The designer's revenue depends on the quality of the output, and she offers a reward to the contestant achieving the highest quality. We characterize the equilibrium behavior, outcomes, and payoffs for both nondiscriminatory and discriminatory (where the reward is contestant‐dependent) contests. We derive conditions under which the designer obtains a larger payoff when using a discriminatory contest and describe settings, where these conditions are satisfied.

Suggested Citation

Pérez‐Castrillo, David and Wettstein, David, Discrimination in a Model of Contests with Incomplete Information About Ability (August 2016). International Economic Review, Vol. 57, Issue 3, pp. 881-914, 2016. Available at SSRN: https://ssrn.com/abstract=2820795 or http://dx.doi.org/10.1111/iere.12179

David Pérez‐Castrillo (Contact Author)

Autonomous University of Barcelona

Edifici B, Campus UAB
Bellaterra, Barcelona 08193
Spain

David Wettstein

Ben-Gurion University of the Negev ( email )

Economics Department
Beer-Sheva 84105
Israel

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