Working Paper: CEPR ID: DP4484
Authors: Stefan Szymanski; Tommaso Valletti
Abstract: Most of the contest literature deals with first prizes; this Paper deals with the optimality of second prizes. We show that in a three-person contest where one contestant is very strong a second prize can be optimal from the point of view of eliciting maximum effort from every contestant. Moreover, we consider the desirability of second prizes from the point of view of competitive balance, which matters for contests such as sports competitions.
Keywords: imperfectly discriminating; logit contests; prizes
JEL Codes: D43; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| second prize (D44) | effort of weak contestants (D79) |
| effort of weak contestants (D79) | effort of strong contestant (D79) |
| second prize (D44) | effort of strong contestant (D79) |
| asymmetry of abilities (D29) | impact of second prize on contestant effort (D44) |