Costly information providing in binary contests

Abstract

AbstractContests are commonly used as a mechanism for eliciting effort and participation in multi-agent settings. Naturally, and much like with various other mechanisms, the information provided to the agents prior to and throughout the contest fundamentally influences its outcomes. In this paper we study the problem of information providing whenever the contest organizer does not initially hold the information and obtaining it is potentially costly. As the underlying contest mechanism for our model we use the binary contest, where contestants’ strategy is captured by their decision whether or not to participate in the contest in the first place. Here, it is often the case that the contest organizer can proactively obtain and provide contestants information related to their expected performance in the contest. We provide a comprehensive equilibrium analysis of the model, showing that even when such information is costless, it is not necessarily the case that the contest organizer will prefer to obtain and provide it to all agents, let alone when the information is costly.