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Risk aversion in symmetric and asymmetric contests

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  • Richard Cornes

    ()

  • Roger Hartley

    ()

Abstract

We analyze existence, uniqueness and properties of equilibria in incompletely discriminating Tullock contests with logistic contest success functions, when contestants are risk averse. We prove that a Nash equilibrium for such a contest exists, but give an example of a symmetric contest with both symmetric and asymmetric equilibria, showing that risk aversion may lead to multiple equilibria. Symmetric contests have unique symmetric equilibria but additional conditions are necessary for general uniqueness. We also study the effects on incumbents of additional competitors entering the contest under these conditions and examine the effects of risk aversion on rent dissipation in symmetric and asymmetric contests. Copyright Springer-Verlag 2012

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 51 (2012)
Issue (Month): 2 (October)
Pages: 247-275

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Handle: RePEc:spr:joecth:v:51:y:2012:i:2:p:247-275

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Related research

Keywords: Contest theory; Aggregative games; Noncooperative games; Risk aversion; C72; D72;

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Cited by:
  1. Jean-Daniel Guigou & Bruno Lovat & Marc Boissaux, 2013. "Asymmetric contests with risky rents," CREA Discussion Paper Series 13-9, Center for Research in Economic Analysis, University of Luxembourg.
  2. Jean-Daniel Guigou & Bruno Lovat & Marc Boissaux, 2013. "Asymmetric contests with risky rents," LSF Research Working Paper Series 13-9, Luxembourg School of Finance, University of Luxembourg.
  3. Roman M. Sheremeta & Subhasish M. Chowdhury, 2014. "Strategically Equivalent Contests," Working Papers 14-06, Chapman University, Economic Science Institute.
  4. TREICH Nicolas, 2009. "Risk-aversion and Prudence in Rent-seeking Games," LERNA Working Papers 09.05.281, LERNA, University of Toulouse.
  5. Kolmar, Martin, 2013. "Group Conflicts. Where do we stand?," Economics Working Paper Series 1331, University of St. Gallen, School of Economics and Political Science.
  6. Schroyen, Fred & Treich, Nicolas, 2013. "The Power of Money: Wealth Effects in Contests," Discussion Paper Series in Economics 13/2013, Department of Economics, Norwegian School of Economics.
  7. Kai Konrad & Dan Kovenock, 2012. "Introduction," Economic Theory, Springer, vol. 51(2), pages 241-245, October.

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