Differential Treatment and the Winner's Effort in Contests with Incomplete Information

40 Pages Posted: 22 Jun 2021 Last revised: 14 Nov 2022

See all articles by Cédric Wasser

Cédric Wasser

University of Basel - Faculty of Business and Economics

Mengxi Zhang

Institute for Microeconomics, University of Bonn

Date Written: November 11, 2022

Abstract

We study the design of all-pay contests when the organizer's objective is to maximize the expected winner's effort and contestants have private information about their valuations for the prize. We identify sufficient conditions for every optimal contest to involve differential treatment of ex ante symmetric contestants. Moreover, we provide a complete characterization of optimal contests when valuations are uniformly distributed. Finally, our results for the winner's effort also imply that differential treatment is even more likely to benefit the organizer when her objective is to maximize the expected highest effort.

Keywords: contests, all-pay auction, favoritism, winner's effort, mechanism design

JEL Classification: D44, D82

Suggested Citation

Wasser, Cédric and Zhang, Mengxi, Differential Treatment and the Winner's Effort in Contests with Incomplete Information (November 11, 2022). Available at SSRN: https://ssrn.com/abstract=3865781 or http://dx.doi.org/10.2139/ssrn.3865781

Cédric Wasser (Contact Author)

University of Basel - Faculty of Business and Economics ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

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

Mengxi Zhang

Institute for Microeconomics, University of Bonn ( email )

Bonn, 53113
Germany

HOME PAGE: http://https://sites.google.com/bu.edu/mengxizhang

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