Differential Treatment and the Winner's Effort in Contests with Incomplete Information

Abstract

We study the design of all-pay contests when the organizer's objective is to maximize the expected winner's effort and contestants have private information about their valuations for the prize. We identify sufficient conditions for every optimal contest to involve differential treatment of ex ante symmetric contestants. Moreover, we provide a complete characterization of optimal contests when valuations are uniformly distributed. Finally, we demonstrate that when differential treatment is allowed, maximizing the expected winner's effort is different from maximizing the expected highest effort, which can be strictly greater in the optimum.