Paper Info
Title
Degree Of Difficulty As The Objective Of Contest Design
Abstract
The compensation received by economic agents reflects their performance. Usually compensation reflects performance measured cardinally, but sometimes ordinal considerations play a role. It is well established that rewards - cardinal or ordinal - can rationally motivate contestants to put forth increased effort. We ask whether rewards, and in particular their cardinal or ordinal nature, can affect agents' strategies. Specifically, if level of effort is fixed and degree of difficulty is the only choice, what strategy is optimal? For example, in a high-jump competition, level of effort is not a meaningful variable; what is of interest is the choice of strategy - the height attempted, or degree of difficulty. We study how optimal strategies reflect reward structure, assuming that rewards may depend on level of difficulty, and go only to successful candidates, or only to candidates who succeed at more difficult tasks. Basing our conclusions in part on simple probabilistic models in which optimal choices can be determined analytically, we show how the structure of competitive rewards alters contestants' rational choices. We adopt a contest-design framework: What combinations of fixed and variable prizes cause contestants to select degrees of difficulty that maximize the contest designer's expected payoff? Our general conclusion is that competition can affect strategic choices, in magnitudes and even directions that are difficult to predict.
Year
DOI
Venue
2014
10.1142/S0219198914500029
INTERNATIONAL GAME THEORY REVIEW
Keywords
Field
DocType
Contest design, rewards, strategy
Economics,Mathematical economics,Ask price,Level of Effort,Ordinal number,Microeconomics,CONTEST,Probabilistic logic,Stochastic game
Journal
Volume
Issue
ISSN
16
3
0219-1989
Citations 
PageRank 
References 
0
0.34
3
Authors
2
Name
Order
Citations
PageRank
Yigal Gerchak146193.53
D. Marc Kilgour257170.61