Bid Caps in Noisy Contests

• 成果类型: Article
• 署名作者: Fu, Qiang; Wu, Zenan; Zhu, Yuxuan
• 署名单位: National University of Singapore; Peking University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20220046
• 发表日期: 2023
• 页码: 426-473
• 关键词: Rent-seeking; risk-aversion; equilibrium; uniqueness

摘要

This paper studies optimal bid caps in a multiplayer noisy contest in which a higher bid does not guarantee a sure win. The bid cap can be either rigid or flexible. The former imposes outright bidding restrictions on players' bids, while the latter taxes bids. A designer structures the bid cap to maximize a weighted sum between aggregate bid and tax revenue. Our analysis characterizes the optimum. A rigid bid is always outperformed by flexible ones, and a laissez- faire policy-i.e., no cap-is optimal when the designer maximizes the aggregate bid. The results also generate novel practical implications.