Discrimination in a Model of Contests with Incomplete Information About Ability

Recognition Program

Authors: David Pérez-Castrillo and David Wettstein

International Economic Review, Vol. 57, No 3, 881-914, August, 2016

We study contests with private information and identical contestants, where contestants’ efforts and innate abilities generate output of varying qualities. The designer’s revenue depends on the quality of the output and she offers a reward to thecontestant achieving the highest quality. We characterize the equilibrium behavior, outcomes and payoffs for both nondiscriminatory and discriminatory (where the reward is contestant-dependent) contests. We derive conditions under which the designer obtains a larger payoff when using a discriminatory contest and describe settings where these conditions are satisfied.

This paper is acknowledged by the Barcelona GSE Research Recognition Program