The yardstick approach in a Tullock contest

Abstract A contest's organizational structure or mechanism is often determined by the organizer's goal. While most contest organizers are interested in maximizing the effort expended by the contestants, some are interested in maximizing social welfare. We examine the corresponding contest mechanisms using a Tullock contest (standard and winner‐pay) combined with the yardstick approach, which in some cases can achieve both goals simultaneously. Two cases are considered. The first is the yardstick approach that takes the form of a payoff scheme in a standard Tullock contest where the contestants (winners or losers) are reimbursed according to the average effort of the other contestants. In the second, the yardstick approach is introduced into a winner‐pay contest, in which the winner pays the average cost of the other contestants' efforts.