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Contest functions: Theoretical foundations and issues in estimation

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  • Jia, Hao
  • Skaperdas, Stergios
  • Vaidya, Samarth

Abstract

Contest functions (alternatively, contest success functions) determine probabilities of winning and losing as a function of contestants' effort. They are used widely in many areas of economics that employ contest games, from tournaments and rent-seeking to conflict and sports. We first examine the theoretical foundations of contest functions and classify them into four types of derivation: stochastic, axiomatic, optimally-derived, and microfounded. The additive form (which includes the ratio or “Tullock” functional form) can be derived in all four different ways. We also explore issues in the econometric estimation of contest functions, including concerns with data, endogeneity, and model comparison.

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  • Jia, Hao & Skaperdas, Stergios & Vaidya, Samarth, 2013. "Contest functions: Theoretical foundations and issues in estimation," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 211-222.
    • Handle: RePEc:eee:indorg:v:31:y:2013:i:3:p:211-222
    DOI: 10.1016/j.ijindorg.2012.06.007
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    More about this item

    Keywords

    Rent-seeking; Conflict; Tournaments; Litigation; Advertising;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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