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Optimal contest design, closeness and the contest success function

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  • Marco Runkel

Abstract

This paper considers the optimal design of an asymmetric two-player contest when the designer’s payoff depends not only on performance of the contestants, but also on the closeness of the contest measured by the difference in winning probabilities. In contrast to previous studies, the impact of closeness on the optimal prize depends on the shape of the contest success function. Furthermore, including closeness in the designer’s objective may induce the designer to uniformly increase the contestants’ effort costs. A similar result is obtained in case the designer may handicap the stronger contestant, but an even contest is never optimal. Copyright Springer Science+Business Media, B.V. 2006

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  • Marco Runkel, 2006. "Optimal contest design, closeness and the contest success function," Public Choice, Springer, vol. 129(1), pages 217-231, October.
    • Handle: RePEc:kap:pubcho:v:129:y:2006:i:1:p:217-231
    DOI: 10.1007/s11127-006-9030-3
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    Cited by:

    1. Jason A. Winfree, 2021. "If You Don'T Like The Outcome, Change The Contest," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 329-343, January.
    2. repec:elg:eechap:15325_5 is not listed on IDEAS
    3. Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2013. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," Economics and Politics, Wiley Blackwell, vol. 25(1), pages 48-60, March.
    4. Epstein, Gil S. & Mealem, Yosef & Nitzan, Shmuel, 2011. "Political culture and discrimination in contests," Journal of Public Economics, Elsevier, vol. 95(1), pages 88-93.
    5. Deng, Shanglyu & Fu, Qiang & Wu, Zenan, 2021. "Optimally biased Tullock contests," Journal of Mathematical Economics, Elsevier, vol. 92(C), pages 10-21.
    6. Clark, Derek J. & Kundu, Tapas, 2021. "Competitive balance: Information disclosure and discrimination in an asymmetric contest," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 178-198.
    7. Derek Clark & Tore Nilssen, 2013. "Learning by doing in contests," Public Choice, Springer, vol. 156(1), pages 329-343, July.
    8. Yizhaq Minchuk & Aner Sela, 2021. "Subsidy and Taxation in All-Pay Auctions under Incomplete," Working Papers 2104, Ben-Gurion University of the Negev, Department of Economics.
    9. March, Christoph & Sahm, Marco, 2018. "Contests as selection mechanisms: The impact of risk aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 114-131.
    10. Mikhail Drugov & Dmitry Ryvkin, 2020. "Hunting for the discouragement effect in contests," Working Papers w0278, New Economic School (NES).
    11. Giuseppe Dari-Mattiacci & Eric Langlais & Bruno Lovat & Francesco Parisi, 2013. "Asymmetries in Rent-Seeking," EconomiX Working Papers 2013-5, University of Paris Nanterre, EconomiX.
    12. Brown, Alasdair & Chowdhury, Subhasish M., 2017. "The hidden perils of affirmative action: Sabotage in handicap contests," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 273-284.
    13. Marco Runkel, 2022. "Player Mobility and Competitive Balance Regulation in Professional Sports Leagues," Journal of Sports Economics, , vol. 23(4), pages 479-500, May.
    14. Marco Sahm, 2010. "The Contest Winner: Gifted or Venturesome?," CESifo Working Paper Series 3285, CESifo.
    15. Minchuk, Yizhaq & Sela, Aner, 2023. "Subsidy and taxation in all-pay auctions under incomplete information," Games and Economic Behavior, Elsevier, vol. 140(C), pages 99-114.
    16. Einav Hart & Judith Avrahami & Yaakov Kareev & Peter M. Todd, 2014. "Investing Even in Uneven Contests: Effects of Asymmetry on Investment in Experimental All-Pay Contests," Discussion Paper Series dp660, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    17. Marco Runkel, 2011. "Revenue Sharing, Competitive Balance and the Contest Success Function," German Economic Review, Verein für Socialpolitik, vol. 12(3), pages 256-273, August.
    18. Epstein, Gil S. & Mealem, Yosef, 2013. "Politicians, Governed vs. Non-Governed Interest Groups and Rent Dissipation," IZA Discussion Papers 7736, Institute of Labor Economics (IZA).
    19. Dietl Helmut M & Lang Markus & Rathke Alexander, 2009. "The Effect of Salary Caps in Professional Team Sports on Social Welfare," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-23, April.
    20. Subhasish M. Chowdhury & Patricia Esteve‐González & Anwesha Mukherjee, 2023. "Heterogeneity, leveling the playing field, and affirmative action in contests," Southern Economic Journal, John Wiley & Sons, vol. 89(3), pages 924-974, January.
    21. Dongryul Lee & Joon Song, 2019. "Optimal Team Contests to Induce More Efforts," Journal of Sports Economics, , vol. 20(3), pages 448-476, April.
    22. Gil Epstein & Yosef Mealem, 2015. "Politicians, governed versus non-governed interest groups and rent dissipation," Theory and Decision, Springer, vol. 79(1), pages 133-149, July.
    23. Giuseppe Dari-Mattiacci & Eric Langlais & Bruno Lovat & Francesco Parisi, 2013. "Asymmetries in Rent-Seeking," Working Papers hal-04141218, HAL.
    24. Fu, Qiang & Wu, Zenan, 2020. "On the optimal design of biased contests," Theoretical Economics, Econometric Society, vol. 15(4), November.
    25. Robert Ritz, 2008. "Influencing rent-seeking contests," Public Choice, Springer, vol. 135(3), pages 291-300, June.

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