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Discrimination in a model of contests with incomplete information about ability

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Article
Author/s: 
David PĂ©rez-Castrillo, David Wettstein
International Economic Review
Issue number: 
Volume 57, Issue 3 August 2016
Publisher: 
Wiley
Year: 
2016
Journal pages: 
881-914
We study contests with private information and identical contestants, where contestants' efforts and innate abilities generate output of varying qualities. The designer's revenue depends on the quality of the output, and she offers a reward to the contestant achieving the highest quality. We characterize the equilibrium behavior, outcomes, and payoffs for both nondiscriminatory and discriminatory (where the reward is contestant-dependent) contests. We derive conditions under which the designer obtains a larger payoff when using a discriminatory contest and describe settings, where these conditions are satisfied.
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