Economic Theory and Experimental Seminar - Jean-François Mercier (Loyola Marymount University)

ETES Series

Room 605, Level 6, 111 Barry Street, Carlton

Map

Title: "Selecting contestants for a rent-seeking contest: A mechanism design approach"

Abstract: In this paper, a contest designer derives profits from aggregate effort exerted by the contestants. I develop a revelation mechanism that enables the contest designer to select a subset of contestants from a pool of candidates in a way that maximizes her profits, even though she is uninformed about the candidates’ valuations for the contest prize. I prove the existence of an incentive compatible and individually rational mechanism. I solve the designer’s problem by using a three-stage game. At Stage 0, the designer designs a mechanism. At Stage 1, candidates participate in the mechanism then a subset of candidates become contestants. Lastly, at Stage 2, information is revealed and the contestants participate in a contest. I show that the optimal size of a contest depends on contestants’ types, the cost of the prize to the designer and on the marginal cost that a contestant imposes on the designer. Contrary to models in which an entry fee s access to the contest, the designer can elicit truthful revelations by imposing revelation costs, and in turn is able to select the optimal subset of contestants.

In addition to the paper above, Jean-François will also talk about some work in progress on group auctions.