Harnessing beliefs to optimally disclose contestants' types
32 Pages Posted: 16 Nov 2015 Last revised: 9 Jul 2021
Date Written: September 25, 2015
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.
Keywords: Contests, Information Disclosure, Strategic Complements and Substitutes, Skewness
JEL Classification: C72, C82, D82
Suggested Citation: Suggested Citation