Carrots and Sticks: Prizes and Punishments in Contests

We study optimal contest design in situations where the designer can reward high performance agents with positive prizes and punish low performance agents with negative prizes. We link the optimal prize structure to the curvature of distribution of abilities in the population. In particular, we identify conditions under which, even if punishment is costly, punishing the bottom is more effective than rewarding the top in eliciting effort input. If punishment is costless, we study the optimal number of punishments in the contest.

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Year of publication:	2010-03-25
Authors:	Moldovanu, Benny ; Sela, Aner ; Shi, Xianwen
Institutions:	University of Toronto, Department of Economics
Subject:	Contests \| All-pay auctions \| Punishments \| Order Statistics

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	19 pages
Classification:	D44 - Auctions ; D82 - Asymmetric and Private Information ; J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc ; J41 - Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008529178