Economic Contests with Incomplete Information and Optimal Contest Design
Nirvikar Singh, Donald Wittman
Management Science · 1988 · Volume 34 · Issue 4
Abstract
This paper analyzes contests where contestants have private information about their abilities, and these abilities may be correlated. It differs from previous work chiefly in that it allows for such imperfect correlation, and that it restricts attention to a discrete output space. The latter aspect enables a complete characterization of possible equilibria. The analysis draws special attention to the possibility that equilibrium may involve lower ability contestants choosing higher effort and winning the contest. It is demonstrated that it may be optimal for the contest designer to induce such equilibria, and some conditions for this are derived. Different possible objectives of the contest designer are also discussed.
Keywords
contests, incomplete information, Bayesian equilibrium
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