Three Essays On The Allocation Of Talent

Author : Jean-François Mercier
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (964 download)

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Download or read book Three Essays in Contest Theory written by Jean-François Mercier and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "In the first chapter, I analyze a model of rent-seeking contest where groups compete non-cooperatively for a group-specific public good. Individuals have private information about how much they value the public good and face a free-riding problem in choosing effort levels. The probability that a group wins depends on the aggregate effort of its members relative to the aggregate effort of all contestants. For tractability, I restrict effort choices to be binary. I show that, in equilibrium, all contestants can exert positive effort ex post, despite the presence of free-riding incentives. This is in contrast to earlier results for contests with perfect information whereby only one contestant in a group exerts effort. I use simulation to show that when moving a player from a group to a group of equal or greater size, average expected effort in equilibrium decreases. Moreover, Olson's paradox, which asserts that groups of large size are less effective at winning a contest than small groups, may or may not hold. Olson's paradox can hold even though the good is purely public within the winning group. Members of the larger group expect other members to draw large valuations, which explains acute free-riding. In the second chapter, I take the perspective of a contest designer who 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 3-stage game where at Stage 0, the designer designs a mechanism, at Stage 1 the contestants participate in the mechanism then contestants are selected and at Stage 2, information is revealed and the selected contestants participate to a contest. I find that contests tend to be larger when candidates to the contest have valuations close to each other. Also, depending on the marginal cost that a contestant imposes on the designer, some candidates with low valuation for the contested good may never be selected to the contest. In the last chapter, I extend a simple model of contest to study the question of league formation in sports economics. I model a professional sports league as a duopoly. I suggest a way to model a competitive allocation of talent into teams, by introducing a sequential game in which teams must first auction the cost of talent, and then, whichever team has made the highest bid, gets to choose first the quantity of talent to hire at the implemented market cost, and then the other team chooses a quantity from the residual pool of talent. I find that in equilibrium, leadership can be taken by the low-revenue team. Also, I find that the high-revenue team acquires more talent in equilibrium and that a revenue-sharing policy will induce the high-revenue team to acquire relatively more talent than the low-revenue team, thus producing a more uneven contest." --