Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58339
Authors: 
Mealem, Yosef
Nitzan, Shmuel
Year of Publication: 
2012
Series/Report no.: 
CESifo working paper: Public Choice 3831
Abstract: 
This paper evaluates differential prize taxation and structural discrimination as a means of increasing efforts in the most widely studied contests. We establish that a designer who maximizes efforts subject to a balanced-budget constraint prefers dual discrimination, namely, change of the contestants' prize valuations as well as bias of the impact of their efforts. Optimal twofold discrimination is often superior to any single mode of discrimination under any lottery. Surprisingly, in the general N-player contest game, under the prototypical simple lottery, it can yield the maximal possible efforts: the highest valuation of the contested prize. If a single mode of discrimination is allowed, then differential taxation is superior to structural discrimination.
Subjects: 
contest design
balanced-budget-constraint
differential prize taxation
structural discrimination
dual polarized discrimination
contest success function
lottery
JEL: 
D70
D72
D74
D78
Document Type: 
Working Paper

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