We study optimal contest design in situations where the designer can reward high performance agents with positive prizes and punish low performance agents with negative prizes. We link the optimal prize structure to the curvature of distribution of abilities in the population. In particular, we identify conditions under which, even if punishment is costly, punishing the bottom is more effective than rewarding the top in eliciting effort input. If punishment is costless, we study the optimal number of punishments in the contest.
|Number of pages||10|
|State||Published - 1 Apr 2012|
ASJC Scopus subject areas
- Business, Management and Accounting (all)
- Economics and Econometrics