Economics Seminar（2017-06）

Title: Optimal Prize Allocation in Contests: The Role of Negative Prizes

Speaker: Jingfeng Lu, National University of Singapore

Time: Tuesday, May 16, 14:00-15:30

Place: Room 217, Guanghua Building 2

Abstract

In this paper, we investigate contest mechanisms with independent contestant private abilities. The contest designer has a fixed prize budget to extract effort from the contestants using both positive and negative prizes. We find that no mechanism can maximize the total effort. With exploding negative prizes, the designer can extract effort approaching the highest possible effort inducible when all contestants are of the maximum ability with certainty. With a bound K on the negative prizes, however, an optimal contest mechanism exists, implementable by a modified all-pay auction with an entry fee K and a minimum bid.

Introduction

Jingfeng Lu is currently an associate professor at National University of Singapore. His research fields cover auctions and contests, industrial organization, mechanism design, etc. His work appears in American Economic Review, Journal of Economic Theory, Rand Journal of Economics, Games and Economic Behaviors among many other journals. He currently serves on the editorial boards of Journal of Economic and Behavior Organization and Journal of Mechanism and Institution Design.

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