12 - Contests: Social Welfare and Public Policy

Summary

In Chapter 12, the optimal properties of contests from a social perspective are outlined. It presents three main criteria for evaluating contests from a social welfare standpoint by considering the total effort, average effort, and effort of the contest winner. Additionally, the chapter delves into the discussion of how to organize different simultaneous contests and how free entry in several exclusive contests leads to social welfare maximization. Furthermore, the chapter examines the social optimality of aggregating local contests –limited to participants from specific areas, like EU countries – into a larger, open contest, such as one based in Brussels. Finally, the chapter provides a new perspective on two significant issues, compulsory education and affirmative action, by illustrating how active public policies can improve social welfare.