SMU SOE Seminar (Oct 4, 2018): On the Optimal Design of Lottery Contests

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TOPIC:

ON THE OPTIMAL DESIGN OF LOTTERY CONTESTS

ABSTRACT This paper develops a novel technique that allows us to obtain optimal multiplicative biases for asymmetric Tullock contests - i.e., the weights placed on contestants' effort entries in the contest success function. Generally, Tullock contests with asymmetric valuations have no closed-form solutions when the impact functions are nonlinear. This prevents us from obtaining the optimum by the usual implicit programming approach, which requires an explicit solution to the equilibrium effort profile. We provide an alternative that allows us to circumvent the difficulty without solving for the equilibrium explicitly. Our approach is not limited to total effort maximization, and applies to contest design problems with noncanonical objective functions. Using this approach, we further establish that linear impact functions with zero headstarts are optimal under a broad class of contest objectives when the contest designer is able to choose any form of regular concave impact functions. In another application, we reexamine the classical issue of comparing all-pay auctions and lottery contests under alternative design objectives. Keywords: Contest Design; Optimal Biases; Tullock Contest; All-Pay Auction JEL Codes: C72, D72 Click here to view the paper. Click here to view the CV.
		PRESENTER Qiang Fu National University of Singapore
		RESEARCH FIELDS Applied Game Theory Political Economy Organizational Economics
		DATE: 4 October 2018 (Thursday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903

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