Abstract
A contestant’s effort depends on her knowledge of her rival’s type. This knowledge is often limited in real-life contests. We propose a model where the principal of a contest has commitment power to verifiably disclose contestants’ types. We investigate the optimal disclosure policy to stimulate contestants’ efforts. Full disclosure stimulates more (less) effort than full concealment if high-types are more (less) likely than low-types. However, regardless of the likelihood of types, the optimal policy is that of contingent disclosure; it is optimal to commit to disclosing if both contestants are high types and concealing otherwise.
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This article is based on the first chapter of my Ph.D. dissertation at Universidad Carlos III, Madrid. Previous versions of this paper circulated under the name “Information in contests” in 2013–2015, and “Harnessing beliefs to stimulate efforts” in 2016–2018. The supervision of Luis Corchón is greatly appreciated. I am pleased to acknowledge useful comments by a Co-Editor, three reviewers, and Carmen Beviá, Guillermo Caruana, Robert Edwards, Tore Ellingsen, Christian Ewerhart, Natalia Fabra, Dawei Fang, Qiang Fu, Aart Gerritsen, Andrea Guariso, Angel Hernando-Veciana, René Kirkegaard, Harald Lang, Jingfeng Lu, Thomas Mariotti, Ricardo Martinez, Diego Moreno, Ron Siegel, Giancarlo Spagnolo, and Huseyin Yildirim. I would like to thank participants at the 2013 GSE Summer Forum (Pompeu Fabra), the 2013 Young Researchers MOVE Workshop on Contests and Tournaments (UAB), the First Microeconomics Graduate Workshop (CEMFI), the 2014 Economics PhD Conference (Warwick), the 25th International Conference on Game Theory (Stony Brook), the 2014 MACCI Enter Workshop (Mannheim), the 2014 European Winter Meeting of the Econometric Society (Carlos III), the 2015 ECARES Summer School (ULB), the 2015 SAET Conference (Cambridge), and the 2016 CBESS Conference on Contests (UEA). I acknowledge financial support from ECO2011-25330/ECON. All errors are my own.
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Serena, M. Harnessing beliefs to optimally disclose contestants’ types. Econ Theory 74, 763–792 (2022). https://doi.org/10.1007/s00199-021-01378-1
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DOI: https://doi.org/10.1007/s00199-021-01378-1