Harnessing beliefs to optimally disclose contestants' types

32 Pages Posted: 16 Nov 2015 Last revised: 9 Jul 2021

See all articles by Marco Serena

Marco Serena

Colegio Universitario de Estudios Financieros CUNEF

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

Serena, Marco, Harnessing beliefs to optimally disclose contestants' types (September 25, 2015). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2018-11, Available at SSRN: https://ssrn.com/abstract=2686543 or http://dx.doi.org/10.2139/ssrn.2686543

Marco Serena (Contact Author)

Colegio Universitario de Estudios Financieros CUNEF ( email )

Calle de Leonardo Prieto Castro, 2
Madrid, 28040
Spain

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