Strategically Equivalent Contests

Using a two-player Tullock-type contest, we show that intuitively and structurally different contests can be strategically equivalent. Strategically equivalent contests generate the same best response functions and, as a result, the same equilibrium efforts. However, strategically equivalent contests may yield different equilibrium payoffs. We propose a simple two-step procedure to identify strategically equivalent contests. Using this procedure, we identify contests that are strategically equivalent to the original Tullock contest, and provide new examples of strategically equivalent contests. Finally, we discuss possible contest design applications and avenues for future theoretical and empirical research

Pay for Percentile

We propose an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions our scheme induces teachers to allocate socially optimal levels of effort to all students. Because this scheme employs only ordinal information, our scheme allows education authorities to employ completely new assessments at each testing date without ever having to equate various assessment forms. Thus, our scheme removes incentives for teachers to teach to a particular assessment form and eliminates any opportunities to influence reward pay by corrupting the equating process or the scales used to report assessment results. Having shown that cardinal measures of achievement growth over time are not a necessary ingredient of incentive systems for educators, we note that education authorities can employ our scheme as a means of providing incentives for educators while employing a separate system for measuring growth in student achievement that involves no stakes for educators. This approach creates no incentives for educators to take actions that contaminate the measurement of student progress.compensation, education, tournaments

Commitment in R&D Tournaments via Strategic Delegation to Overoptimistic Managers

This paper shows that it is profitable for a firm to hire an overoptimistic manager to commit to a certain investment strategy in an R&D tournament situation. In the unique symmetric equilibrium, all firms delegate to overoptimistic managers, where the optimal degree of overoptimism depends on the riskiness of the tournament. In these situations a manager’s type may serve as a substitute for delegation via contracts. By delegating to overoptimistic managers, firms can escape the rat race nature of R&D tournaments

Side-Payments and the Costs of Conflict.

Conflict and competition often impose costs on both winners and losers, and conflicting parties may prefer to resolve the dispute before it occurs. The equilibrium of a conflict game with side-payments predicts that with binding offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30% of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 87% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 39% of gains come from avoided conflicts and 61% from reduced conflict expenditures.contests, conflict resolution, side-payments, experiments

Top guns may not fire:Best-shot group contests with group-specific public good prizes

We analyze a group contest in which n groups compete to win a group-specific public good prize. Group sizes can be different and any player may value the prize differently within and across groups. Players exert costly efforts simultaneously and independently. Only the highest effort (the best-shot) within each group represents the group effort that determines the winning group. We fully characterize the set of equilibria and show that in any equilibrium at most one player in each group exerts strictly positive effort. There always exists an equilibrium in which only the highest value player in each active group exerts strictly positive effort. However, perverse equilibria may exist in which the highest value players completely free-ride on others by exerting no effort. We provide conditions under which the set of equilibria can be restricted and discuss contest design implications