We study a contest with multiple, nonidentical prizes. Participants are privately informed about a parameter (ability) affecting their costs of effort. The contestant with the highest effort wins the first prize, the contestant with the second-highest effort wins the second prize, and so on until all the prizes are allocated. The contest's designer maximizes expected effort. When cost functions are linear or concave in effort, it is optimal to allocate the entire prize sum to a single "first" prize. When cost functions are convex, several positive prizes may be optimal.
We study a contest with multiple (not necessarily equal) prizes. Contestants have private information about an ability parameter that a¤ects their costs of bidding. The contestant with the highest bid wins the …rst prize, the contestant with the second-highest bid wins the second prize, and so on until all the prizes are allocated. All contestants incur their respective costs of bidding. The contest's designer maximizes the expected sum of bids. Our main results are: 1) We display bidding equlibria for any number of contestants having linear, convex or concave cost functions, and for any distribution of abilities. 2) If the cost functions are linear or concave, then, no matter what the distribution of abilities is, it is optimal for the designer to allocate the entire prize sum to a single "…rst" prize. 3) We give a necessary and su¢cient conditions ensuring that several prizes are optimal if contestants have a convex cost function.
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