Contests with Negative Prize: An Experimental Investigation

Speaker: Dr Jingjing Zhang

Affiliation: RMIT University

Online via Zoom: https://uqz.zoom.us/j/84008636651

Abstract 

Contests that aim to maximize the highest effort (i.e., best performance) have become increasingly popular and prevalent for organizations and individuals such as in research tournaments or on crowd sourcing platforms. In such contests, only the quality of the innovation or the solution eventually adopted by the organizer matters. In this paper, we show that the optimal contest in maximizing the highest effort can be implemented by a modified all-pay auction with negative prize and reserve. We then compare the performance of contests in an experiment varying the size of the entry fees. Consistent with our predictions, the introduction of entry fee leads to significantly higher effort that increases in the size of the entry fee. This is because the entry fee provides better incentives to the high ability type as the top up prize as well as enough incentives to the low ability type anticipating the return of the entry fee in the case that no one's effort exceeds the reserve effort.

About the presenter's meeting

If you would like to meet with Dr Zhang, please contact Dr Zachary Breig