| A theoretical study of auctions is conducted to examine their usefulness for reducing the information burden on tournament sponsors. The findings suggest auctions may be beneficial for selecting contestants in tournaments, depending upon the manner in which potential contestants differ. If contestants differ only in their costs of effort, auctions are efficient. However, if contestants have different initial starting positions, auctions will be inefficient unless the size of the winner's prize is adjusted to be an increasing function of the entry bids. Auctions can also be incorporated at the end of a tournament to determine the winner's prize instead of just offering a fixed prize. Tournaments with prizes determined by auction dominate contests with fixed prizes by inducing greater effort by contestants for the same expected costs. Finally, a short study is conducted of competition in defense acquisition. A comparison of government procurement policies with the requirements of an efficient research tournament suggests current practices deviate substantially from the basic elements needed to run an efficient contest. |
