Optimal Design of Consumer Contests

Abstract

A consumer contest is a sales promotion technique that requires participants to apply certain skills as they compete for prizes or awards. This article is the first to employ a game-theoretical approach to investigate consumer contest design issues, including prize structure, segmentation, and handicapping. First, the authors find that both skill distribution and the number of contestants play an important role in determining the optimal prize structure in consumer contests. Specifically, if the skill distribution has the increasing hazard-rate property, it is optimal for a marketer to use a winner-take-all design. In large contests, for the winner-take-all approach to be optimal, it suffices to have the increasing hazard-rate property only at the high end of the skill distribution. Second, increasing contest size is beneficial to the marketer. Third, a less dispersive skill distribution leads to higher consumption by consumers at all skill levels and thus is beneficial to the marketer. The marketer may achieve less dispersive skill distributions by (1) segmenting or screening contestants according to their skill levels and (2) adopting a performance evaluation scheme that handicaps high-skilled contestants.

Task Division for Team Success in Crowdsourcing Contests: Resource Allocation and Alignment Effects

“…The extant literature has focused extensively on contest design [10,40,61,65] or the effects of individual behavior on contest outcomes with the goal of maximizing the payoff [1,6,32,46,64]. These studies have demonstrated the advantages of crowdsourcing, such as lower cost [32], lower risk [10], higher quality solutions [24], and multiple alternative solutions [61].…”

Rising to the challenge: A model of contest performance

“…Deci, 8 for example, found that an individual ' s need for competence would lead them to seek challenges that were aligned with or just above their capabilities. More generally, Liu et al 11 found that an alignment of skills had a positive effect on contest engagement, leading to increased performance.…”

“…The winner of a contest is selected by judging the quality of their entry against all other entries. 11,12 Contests can take on a single-stage or multi-stage design. In a single-stage design, a contestant enters, competes and wins or loses in a single contest round.…”

“…Existing academic research in promotions has examined coupons, 16 e-coupons, 17 loyalty programs, 18 channel promotion, 19 sales promotions 20 and rebates. 21 Economists have examined contests from several angles, including contest design, 11,22 contest success functions, 23,24 prize structures 25,26 and contestant effort. 27 In computer science, a small subfi eld of research on programming contests has resulted in research into competitor strategies and contest operations.…”

Managing in the Information Economy

“…The results discussed below are based on a particular case of the general framework presented in the previous section (Liu, Geng, and Whinston, 2004). In particular, we maintain that users differ in their ability levels, but their performance is a deterministic function of usage and ability.…”