Abstract
"I study contests in which each player is ranked by a scoring rule based on both her performance and how close this performance is to a private target, set before the contest.
Each player’s decision problem is to choose her target when performance is subject to a random component. I analyse the incentive properties of target setting, derive conditions on the primitives such that equilibria exist and characterise the players’ behaviour. I show that target setting generates outcome uncertainty under a large class of conditions. In
particular, neither private abilities nor perfectly correlated states are necessary. Target setting, therefore, has important implications in contest design as outcome uncertainty is a salient determinant of consumers’ demand for contests."
Each player’s decision problem is to choose her target when performance is subject to a random component. I analyse the incentive properties of target setting, derive conditions on the primitives such that equilibria exist and characterise the players’ behaviour. I show that target setting generates outcome uncertainty under a large class of conditions. In
particular, neither private abilities nor perfectly correlated states are necessary. Target setting, therefore, has important implications in contest design as outcome uncertainty is a salient determinant of consumers’ demand for contests."
| Original language | English |
|---|---|
| Place of Publication | Centre for Research in Economic Theory and its Applications, Discussion Paper Series, University of Warwick |
| Publisher | University of Warwick |
| Publication status | Published - Nov 2018 |
Keywords
- contests
- target setting
- competitive balance
- incentives
- incomplete information