Covert Discrimination and Self-promotion

Matthew W. Thomas


Agents with similar skill may differ in their ability to self-promote. We consider the problem of a manager who uses an anonymous contest to extract effort from equally productive workers who differ in their ability to win the contest. In this setting, the manager would like to offer a larger prize to the weaker worker to increase competitiveness. However, this overt discrimination is forbidden by anonymity. Instead, the designer is limited to contests with covert discrimination: those which give the weaker player a larger prize only in equilibrium. If the prize is fixed, it is often possible to engage in covert discrimination against the stronger player to increase total output. However, full surplus extraction is not typically possible. So, the stronger player is better off than the weaker player despite the smaller prize. If the designer can endogenize the prize, full surplus extraction is possible in an all-pay auction as long as a single-crossing condition is met.

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  title     = "Covert Discrimination and Self-promotion",
  author    = "Matthew W. Thomas",
  journal   = "Working Paper",
  year      = "2022"