ENHANCING EFFORT SUPPLY WITH PRIZE-AUGMENTING ENTRY FEES: THEORY AND EXPERIMENTS

Robert G. Hammond; Bin Liu; Jingfeng Lu; Yohanes E. Riyanto

doi:10.1111/iere.12379

ENHANCING EFFORT SUPPLY WITH PRIZE-AUGMENTING ENTRY FEES: THEORY AND EXPERIMENTS

Robert G. Hammond^*, Bin Liu, Jingfeng Lu, Yohanes E. Riyanto

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

Abstract

Entry fees are widely observed in contests. We study the effect of a prize-augmenting entry fee on expected total effort in an all-pay auction setting where the contestants' abilities are private information. An entry fee reduces equilibrium entry but can enhance the entrants' effort supply. Our theoretical model demonstrates that the optimal entry fee is strictly positive and finite. In a laboratory experiment, we empirically test the effect of entry fees on effort supply. Our results provide strong support for the notion that a principal can elicit higher effort using an appropriately set entry fee to augment the prize purse.

Original language	English
Pages (from-to)	1063-1096
Number of pages	34
Journal	International Economic Review
Volume	60
Issue number	3
DOIs	https://doi.org/10.1111/iere.12379
Publication status	Published - 2019
Externally published	Yes

Bibliographical note

Publisher Copyright:
© (2019) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

ASJC Scopus Subject Areas

Economics and Econometrics

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10.1111/iere.12379

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abstract = "Entry fees are widely observed in contests. We study the effect of a prize-augmenting entry fee on expected total effort in an all-pay auction setting where the contestants' abilities are private information. An entry fee reduces equilibrium entry but can enhance the entrants' effort supply. Our theoretical model demonstrates that the optimal entry fee is strictly positive and finite. In a laboratory experiment, we empirically test the effect of entry fees on effort supply. Our results provide strong support for the notion that a principal can elicit higher effort using an appropriately set entry fee to augment the prize purse.",

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ENHANCING EFFORT SUPPLY WITH PRIZE-AUGMENTING ENTRY FEES: THEORY AND EXPERIMENTS

Abstract

Bibliographical note

ASJC Scopus Subject Areas

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