The optimal allocation of prizes in contests

Benny Moldovanu, Aner Sela

Research output: Contribution to journalArticlepeer-review

Abstract

We study a content with multiple, nonidentical prizes. Participants are privately informed about a parameter (ability) affecting their costs of effort. The contestant with the highest effort wins the first prize, the contestant with the second-highest effort wins the second prize, and so on until all the prizes are allocated. The contest's designer maximizes expected effort. When cost functions are linear or concave in effort, it is optimal to allocate the entire prize sum to a single "first" prize. When cost functions are convex, several positive prizes may be optimal.

Original languageEnglish
Pages (from-to)542-558
Number of pages17
JournalAmerican Economic Review
Volume91
Issue number3
DOIs
StatePublished - Jun 2001
Externally publishedYes

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