Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/92980 
Year of Publication: 
2013
Series/Report no.: 
Bonn Econ Discussion Papers No. 09/2013
Publisher: 
University of Bonn, Bonn Graduate School of Economics (BGSE), Bonn
Abstract: 
We consider multi-stage elimination contests, where agents’ efforts at different stages generate some output for the organizers. Depending on the output function we characterize the optimal prize structure of the tournament and show that it is almost efficient. We have found that in some cases quite a strange structure turns out to be optimal, under which prizes for agents are smaller at the later stages than at the earlier ones. Sufficient conditions for optimality of such structures are provided for the case of a separable output function. Next we consider the modification, when the designer can specify a winning function. We provide sufficient conditions for optimality of a winning function and show that it can be found in the class of Tullock functions. This function does not depend on the output function. There is always an efficient equilibrium, under which the designer is able to extract the whole surplus from the agents and the corresponding optimal prize structure is always non-decreasing.
Subjects: 
Tullock contests
multiple-stage tournament
optimal structure
negative prizes
JEL: 
C72
D86
J31
L2
Document Type: 
Working Paper

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