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Free keywords:
Contests, Strategic complements, Strategic substitutes, Information
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.
