Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101100
Authors: 
Stracke, Rudi
Höchtl, Wolfgang
Kerschbamer, Rudolf
Sunde, Uwe
Year of Publication: 
2014
Series/Report no.: 
Working Papers in Economics and Statistics 2014-08
Abstract: 
This paper investigates the implications of different prize structures on effort provision in dynamic (two-stage) elimination contests. Theoretical results show that, for risk-neutral participants, a structure with a single prize for the winner of the contest maximizes total effort, while a structure with two appropriately chosen prizes (a runner-up prize and a final prize) ensures incentive maintenance across stages. In contrast, a structure with two prizes may dominate a winner-takes-all contest in both dimensions if participants are risk-averse. Evidence from laboratory experiments is largely consistent with these predictions, suggesting that contest design should account for risk attitudes of participants.
Subjects: 
Dynamic Contests
Multiple Prizes
Risk Aversion
Experiment
Over-provision
JEL: 
C72
D72
J33
Document Type: 
Working Paper

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