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Allocation rules of indivisible prizes in team contests

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Abstract

We analyze contests in which teams compete to win indivisible homogeneous prizes. Teams are composed of members who may differ in their ability, and who exert effort to increase the success of their team. Each team member can obtain at most one prize as a reward. As effort is costly, teams use the allocation of prizes to give incentives and solve the free-riding problem. We develop a two-stage game. First, teams select a prize-allocation rule. Then, team members exert effort. Members take into account how their effort and the allocation rule influence the chance they receive a prize. We prove the existence and uniqueness of equilibrium. We characterize the optimal prize-assignment rule and individual and aggregate efforts. We then show that the optimal assignment rule is generally not monotonic.

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Authors and Affiliations

  1. Department of Economics, Boston College, Maloney Hall 395, Chestnut Hill, MA, USA

    Hideo Konishi

  2. Department of Applied Economics, HEC Montreal, 3000 St Catherine Road, Montreal, QC, H3T2A7, Canada

    Nicolas Sahuguet

  3. Erasmus School of Economics and Tinbergen Institute, Burgemeester Oudlaan 50, Rotterdam, The Netherlands

    Benoît S. Y. Crutzen

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  1. Hideo Konishi
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  2. Nicolas Sahuguet
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  3. Benoît S. Y. Crutzen
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Correspondence to Nicolas Sahuguet.

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We thank Sabine Flamand, Taiji Furusawa, Junichi Itaya, Takashi Kunimoto, Daisuke Oyama, Dimitar Simeonov, Kaoru Ueda, Utku Unver, Bumin Yenmez, Huseyin Yildirim, and two anonymous referees for their helpful comments. We also thank the participants of the Workshops and Conferences at NUS in Singapore (IMS), SAET in Taipei, SSCW in Seoul, and PET in Strasbourg, and seminar participants at Boston College, Vanderbilt University, Hokkaido University, and the University of Tokyo.

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Konishi, H., Sahuguet, N. & Crutzen, B.S.Y. Allocation rules of indivisible prizes in team contests. Econ Theory (2023). https://doi.org/10.1007/s00199-023-01534-9

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