Events

Professor Teddy Kim
Professor of Economics
Emory University

Abstract

We consider the problem of optimal contest design in an environment where contestants choose not only their effort, but also the distribution of shocks affecting their output. We show that the presence of such strategic risk taking has a stark effect on contest design: The winner-take-all contest, whereby the entire prize budget is allocated to the top performer, maximises the expected effort (or output) of the agents regardless of the shape of their cost function.