| Abstract: |
Two potentially asymmetric players compete for a prize of common value, which
is initially unknown, by exerting efforts. A designer has two instruments for
contest design. First, she decides whether and how to disclose an informative
signal of the prize value to players. Second, she sets the scoring rule of the
contest, which varies the relative competitiveness of the players. We show
that the optimum depends on the designer's objective. A bilateral symmetric
contest - in which information is symmetrically distributed and the scoring
bias is set to offset the initial asymmetry between players - always maximizes
the expected total effort. However, the optimal contest may deliberately
create bilateral asymmetry - which discloses the signal privately to one
player, while favoring the other in terms of the scoring rule - when the
designer is concerned about the expected winner's effort. The two instruments
thus exhibit complementarity, in that the optimum can be made asymmetric in
both dimensions even if the players are ex ante symmetric. Our results are
qualitatively robust to (i) affiliated signals and (ii) endogenous information
structure. We show that information favoritism can play a useful role in
addressing affirmative action objectives. |