Competitive Balance: Information Disclosure and Discrimination in an Asymmetric Contest

34 Pages Posted: 27 Mar 2020 Last revised: 18 Aug 2020

See all articles by Derek J. Clark

Derek J. Clark

Tromso University Business School

Tapas Kundu

Oslo Business School, Oslo Metropolitan University; UiT the Arctic University of Norway

Date Written: August 18, 2020

Abstract

We study a design problem for an effort-maximizing principal in a two-player contest with two dimensions of asymmetry. Players have different skill levels and an information gap exists, as only one player knows the skill difference. The principal has two policy instruments to redress the lack of competitive balance due to asymmetry; she can commit to an information-revealing mechanism, and she can discriminate one of the players by biasing his effort. We characterize the optimal level of discrimination to maximize aggregate effort, showing how this is in turn inextricably linked to the choice of information revelation. Applications are found in newcomer-incumbent situations in an internal labor market, sales-force management, and research contests.

Keywords: Asymmetric Contest, Information Design, Discrimination

JEL Classification: D02, D72, D82

Suggested Citation

Clark, Derek J. and Kundu, Tapas, Competitive Balance: Information Disclosure and Discrimination in an Asymmetric Contest (August 18, 2020). Available at SSRN: https://ssrn.com/abstract=3543378 or http://dx.doi.org/10.2139/ssrn.3543378

Derek J. Clark (Contact Author)

Tromso University Business School ( email )

Breivika
Tromsø, NO-9037
Norway

Tapas Kundu

Oslo Business School, Oslo Metropolitan University ( email )

Pilestredet 35
Oslo, 0167
Norway

HOME PAGE: http://www.tapaskundu.net

UiT the Arctic University of Norway ( email )

Breivika
Tromsø, NO-9037
Norway

HOME PAGE: http://www.tapaskundu.net

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