Abstract
In many tournaments investments are made over time. The question whether to conduct a review once at the end, or additionally at points midway through the tournament, is a strategic decision. If the latter course is chosen, then the designer must establish both a rule for aggregating the results of the different reviews and a rule for determining compensations. We first study the case of a fixed, exogenously given prize and then extend the analysis to the case where the prize is not fixed but may vary with the tournament's outcome. It is shown that (1) it is always optimal to assign a higher weight to the final review; (2) this weight increases with the dominance of the first-stage effort in determining the final review's outcome. When the prize is not fixed, the optimal design generates an asymmetric tournament in the second stage that favors the winner of the midterm review.
| Original language | English |
|---|---|
| Pages (from-to) | 162-190 |
| Number of pages | 29 |
| Journal | Games and Economic Behavior |
| Volume | 66 |
| Issue number | 1 |
| DOIs | |
| State | Published - May 2009 |
| Externally published | Yes |
Bibliographical note
Funding Information:We wish to thank Maya Eden and Paul Schweinzer for helpful conversations, Michael Borns who edited the paper and the two anonymous referees of this journal for their invaluable comments. We gratefully acknowledge financial support from the ESRC ES/E024483/1, German Science Foundation SFB TR 15 and the Falk institute.