Ridge Distributions and Information Design in Simultaneous All-Pay Auction Contests

Two contestants informed of their own type compete in a contest, and the organizer ex-ante designs a public anonymous disclosure policy to maximize contestants’ total effort. While a mildly-correlated posterior leads to an efficient equilibrium with maximized surplus, a sufficiently-positively-correlated posterior achieves exploitation with zero contestant equilibrium payoff. We define and fully characterize ridge distributions, under which the equilibrium is both efficient and exploitative. Whenever a partial disclosure policy is optimal, it generates at least one posterior from ridge distributions. With a prior of sufficiently positive correlation, the optimal policy is both efficient and exploitative; otherwise, it is neither efficient nor exploitative