Optimal Contest Design with Entry Restriction

TL;DR

This paper analyzes contest design with entry restrictions, determining optimal prize structures and entry limits to maximize individual or total effort, based on a Bayesian equilibrium framework.

Contribution

It introduces a framework for designing contests with entry restrictions, deriving the unique symmetric Bayesian Nash equilibrium and optimal designs for effort maximization.

Findings

Optimal contest design depends on the objective (individual vs. total effort).

Characterization of the unique symmetric Bayesian Nash equilibrium.

Guidelines for setting entry limits and prizes for maximum effort.

Abstract

This paper explores the design of contests involving $n$ contestants, focusing on how the designer decides on the number of contestants allowed and the prize structure with a fixed budget. We characterize the unique symmetric Bayesian Nash equilibrium of contestants and find the optimal contests design for the maximum individual effort objective and the total effort objective.