DP12493 Prize allocation and incentives in team contests

Author(s): BenoƮt SY Crutzen, Sabine Flamand, Nicolas Sahuguet
Publication Date: December 2017
Keyword(s):
JEL(s):
Programme Areas: Public Economics, Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12493

We study a contest between teams that compete for multiple indivisible prizes. Team output is a CES function of all the team members' efforts. We use a generalized Tullock contest success function to allocate prizes between teams. We study how different intra-team prize allocation rules impact team output. We consider an egalitarian rule that gives all members the same chance of receiving a prize, and a list rule that sets ex-ante the order in which members receive a prize. The convexity of the cost of effort function and the complementarity of individual efforts determine which rule maximizes team output and success. Our results speak to many real world situations, such as elections, contests for the allocation of local public goods and the internal organization of firms.