AltInst: Auctioning Entry into Tournaments

"Auctioning Entry into Tournaments"
Journal of Political Economy, Vol. 107, No. 3, June 1999

BY: RICHARD L. FULLERTON
United States Air Force Academy
R. PRESTON MCAFEE
University of Texas at Austin
Contact: R. PRESTON MCAFEE

Email: Mailto:mcafee@eco.utexas.edu
Postal: University of Texas at Austin
Austin, TX 78712 USA
Phone: (512)475-8533
Fax: (512)471-3510
Co-Auth: RICHARD L. FULLERTON
Email: Mailto:FullertR@af.pentagon.mil
Postal: United States Air Force Academy
Colorado Springs, CO 80840-6234 USA

ABSTRACT:
A research tournament model with heterogeneous contestants is
presented. For a large class of contests the optimal number of
contestants is two. This insight makes designing the tournament
easier and highlights the importance of selecting highly
qualified contestants. While customary uniform-price and
discriminatory-price auctions are intuitively appealing
mechanisms for solving this adverse selection problem, in
practice they generally will not be efficient mechanisms for
selecting contestants. Instead, we propose an alternative
auction format that is equally simple to implement and
efficiently selects the most qualified contestants to compete,
regardless of the form of contestant heterogeneity.

JEL Classification: D81, D82
______________________________

Robin Hanson rhanson@gmu.edu http://hanson.gmu.edu
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323

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Received on Tue Aug 3 19:52:20 1999