Optimal Feedback in Contests

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

We obtain optimal dynamic contests for environments where the designer monitors effort through coarse, binary signals - Poisson successes - and aims to elicit maximum effort, ideally in the least amount of time possible, given a fixed prize. The designer has a vast set of contests to choose from, featuring termination and prize-allocation rules together with real-time feedback for the contestants. Every effort-maximizing contest (which also maximizes total expected successes) has a history-dependent termination rule, a feedback policy that keeps agents fully apprised of their own success, and a prize-allocation rule that grants them, in expectation, a time-invariant share of the prize if they succeed. Any contest that achieves this effort in the shortest possible time must in addition be what we call second chance: once a pre-specified number of successes arrive, the contest enters a countdown phase where contestants are given one last chance to succeed.

Original languageEnglish (US)
Pages (from-to)2370-2394
Number of pages25
JournalReview of Economic Studies
Volume90
Issue number5
DOIs
StatePublished - Oct 1 2023

Funding

We are grateful to our editor Bard Harstad, four anonymous referees, Daniel Barron, Piotr Dworczak, Willie Fuchs, Marina Halac, Navin Kartik, Igor Letina, Elliot Lipnowski, Alessandro Pavan, Michael Powell, Agusti’n Rayo, Andy Skrzypacz, and participants at various seminars and conferences for helpful comments. Author Jeff Ely acknowledges the support of NSF grant SES-1851883.

Keywords

  • Agency problem
  • Contests
  • Incentives
  • Information design
  • Moral hazard

ASJC Scopus subject areas

  • Economics and Econometrics

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