Knowing the gap - intermediate information in tournaments

Intermediate information is often available to competitors in dynamic tournaments. We develop two simple tournament models with two stages: one with intermediate information on subjects’ relative positions after the first stage, one without. In our models, equilibrium behavior in both stages is not changed by intermediate information. We test our formal analysis using data from laboratory experiments. We find no difference between average first and second stage efforts. With intermediate information, however, subjects adjust their effort to a higher extent. Subjects who lead tend to lower their second stage effort, subjects who lag still try to win the tournament. Overall, intermediate information does not endanger the effectiveness of rank-order tournaments: incentives do neither break down nor does a rat race arise. We also briefly investigate costly intermediate information

The Optimal Allocation of Prizes in Contests

We study a contest with multiple (not necessarily equal) prizes. Contestants have private information about an ability parameter that affects their costs of bidding. The contestant with the highest bid wins the first prize, the contestant with the second-highest bid wins the second prize, and so on until all the prizes are allocated. All contestants incur their respective costs of bidding. The contest's designer maximizes the expected sum of bids. Our main results are: 1) We display bidding equlibria for any number of contestants having linear, convex or concave cost functions, and for any distribution of abilities. 2) If the cost functions are linear or concave, then, no matter what the distribution of abilities is, it is optimal for the designer to allocate the entire prize sum to a single ''first'' prize. 3) We give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function.

Contest Theory and its Applications in Sports

This paper outlines how the theory of contests is applied to professional team sports leagues. In the first part, we present the traditional Tullock contest and explain some basic properties of the equilibrium. We will then extend this static contest to a two-period model in order to analyze dynamic aspects of contests. In the second part, we will present applications of contest theory in sports. In particular, we will show how the Tullock framework is applied to models of team sports leagues. For this purpose, we will first explain the value creation process in team sports leagues and show how club revenues are related to the contest success function. Then, we present some basic modeling issues; for instance, we show how the assumption of flexible vs. fixed talent supply depends on the league under consideration and how it influences the equilibria. Furthermore, we explicate the effect of revenue sharing on competitive balance in the different models. Then we address the relationship between competitive balance and social welfare. Finally, we illustrate why many clubs tend to "overinvest" in playing talent in many team sports leagues.Contest theory, Tullock contest, sports leagues, competitive balance, revenue sharing, social welfare, overinvestment

OPTIMAL CONTEST DESIGN WITH NONLINEAR COSTS

Master'sMASTER OF SOCIAL SCIENCE

Affirmative Action: One Size Does Not Fit All

This paper identifies a new reason for giving preferences to the disadvantaged using a model of contests. There are two forces at work: the effort effect working against giving preferences and the selection e¤ect working for them. When education is costly and easy to obtain (as in the U.S.), the selection effect dominates. When education is heavily subsidized and limited in supply (as in India), preferences are welfare reducing. The model also shows that unequal treatment of identical agents can be welfare improving, providing insights into when the counterintuitive policy of rationing educational access to some subgroups is welfare improving

Endogenous formation of alliances in conflicts

This paper studies the endogenous formation of alliance in conflicts offering a survey of the recent literature and providing new results. We analyze the effect of group sizes on conflict, study endogenous alliance formation in a general model of conflict with linear technology and discuss recent developments of the theory of alliance formation, involving the determination of sharing rules inside the alliance and dynamic alliance formation in nested conflicts.alliance formation, conflicts, rent-seeking contest, collective action, the paradox of group size, sharing rules, nested conflicts

Preemptive Behavior in Sequential-Move Tournaments with Heterogeneous Agents

Rank-order tournaments are usually modeled simultaneously. However, real tournaments are often sequential. We show that agents’ strategic behavior in sequential-move tournaments significantly differ from the one in simultaneous-move tournaments: In a sequential-move tournament with heterogeneous agents, there may be either a first-mover or a second-mover advantage. Under certain conditions the first acting agent chooses a preemptively high effort so that the following agent gives up. The principal is able to prevent preemptive behavior in equilibrium, but he will not implement first-best efforts although the agents are risk neutral.preemption, tournaments

Contests with Size Effects.

In this paper we analyze the structure of contest equilibria with a variable number of agents. First we analyze a situation where the total prize depends on the number of agents and where every single agent faces opportunity costs of investing in the contest. Second we analyze a situation where the agents face a trade-off between productive and appropriative investments. Here, the number of agents may also influence the productivity of productive investments. It turns out that both tyes of contests may lead to opposing results concerning the optimal numnber of contestants depending on the strength of size effects. Whereas in the former case individual utility is J-shaped when the number of agents increases, the opposite holds true for the latter case. We discuss the implications of our findings for the case of competition on markets and for the case fo unstable property rights.

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. This approach removes incentives for teachers to teach to a particular assessment form and eliminates opportunities to influence reward pay by corrupting the equating process or the scales used to report assessment results. Our system links compensation to the outcomes of properly seeded contests rather than cardinal measures of achievement growth. Thus, education authorities can employ our incentive scheme for educators while employing a separate system for measuring growth in student achievement that involves no stakes for educators. This approach does not create direct incentives for educators to take actions that contaminate the measurement of student progress.Income ; Wages