Events at CERGE-EI

Prof. Mikhail Drugov

Universitat Autònoma de Barcelona, Spain

Authors: Mikhail Drugov, Dmitry Ryvkin and Jun Zhang

Abstract: We study tournaments where winning a rank-dependent prize requires passing a minimum performance standard. For any prize allocation, the optimal standard is at a mode of performance that is weakly larger than the global mode. The winner-take-all prize scheme is optimal for noise distributions with an increasing failure rate above the mode; and awarding equal prizes to all qualifying agents is optimal for noise distributions with a decreasing failure rate. For distributions with monotone likelihood ratios—log-concave and log-convex, respectively—these pay schemes are also optimal in a wider class of anonymous, monotone contracts that may depend on cardinal performance.

Keywords: tournament, performance standard, winner-take-all, equal prize sharing
JEL codes: C72, D72, D82

Full Text: Tournaments with a Standard