Temporary exclusion in repeated contests

Abstract

Consider a population of agents who repeatedly compete for awards, as in the case of researchers annually applying for grants. Noise in the selection process may encourage entry of low quality proposals, forcing the principal to commit large resources to reviewing applications and further increasing award misallocation. A \emph{temporary exclusion} policy prohibits an agent from applying in the current period if they were rejected in the previous. We compare the steady state equilibria of the games with and without exclusion. Whenever the benefit from winning is sufficiently large exclusion results in more self-selection, eliminating entry of low quality applications. We extend the analysis to more general exclusion policies. We also show that exclusion has a distributional effect, where better able agents exhibit more self-selection.