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Effort maximization in asymmetric contest games with heterogeneous contestants

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Author Info

  • Jörg Franke

    ()

  • Christian Kanzow

    ()

  • Wolfgang Leininger

    ()

  • Alexandra Schwartz

    ()

Abstract

Contest rules are set up by administrators who frequently have discretionary power in specifying the details of these rules, i.e., they can bias the contest rules toward specific contestants in order to further their prime objective. We derive the optimal bias of the contest rule for a contest administrator, who is interested in maximizing the total efforts expended in the contest. The solution is obtained in closed form for a widely used class of n-person contest games. Setting the optimal bias has important implications: (i) there is never exclusion of strong players, instead there is (endogenously induced) inclusion of weak contestants; (ii) the contest administrator will optimally level the playing field by encouraging weak contestants, but he will not equalize the contestants’ chances unless they are identical; and (iii) at least three contestants will be active in equilibrium of the optimal contest, irrespective of heterogeneity. Copyright Springer-Verlag 2013

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 52 (2013)
Issue (Month): 2 (March)
Pages: 589-630

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Handle: RePEc:spr:joecth:v:52:y:2013:i:2:p:589-630

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Related research

Keywords: Contest theory; Contest design; Level playing field; C72; D72;

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References

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  1. Luis Corchon & Matthias Dahm, 2007. "Foundations For Contest Success Functions," Economics Working Papers we070401, Universidad Carlos III, Departamento de Economía.
  2. Hao Jia, 2008. "A stochastic derivation of the ratio form of contest success functions," Public Choice, Springer, vol. 135(3), pages 125-130, June.
  3. Dasgupta, Ani & Nti, Kofi O., 1998. "Designing an optimal contest," European Journal of Political Economy, Elsevier, vol. 14(4), pages 587-603, November.
  4. Qiang Fu, 2006. "A Theory of Affirmative Action in College Admissions," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 420-428, July.
  5. Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2010. "Political Culture and Discrimination in Contests," CESifo Working Paper Series 3170, CESifo Group Munich.
  6. Richard Cornes & Roger Hartley, 2005. "Asymmetric contests with general technologies," Economic Theory, Springer, vol. 26(4), pages 923-946, November.
  7. Fang, Hanming, 2002. " Lottery versus All-Pay Auction Models of Lobbying," Public Choice, Springer, vol. 112(3-4), pages 351-71, September.
  8. Esteban, Joan & Ray, Debraj, 1999. "Conflict and Distribution," Journal of Economic Theory, Elsevier, vol. 87(2), pages 379-415, August.
  9. Marco Runkel, 2008. "Revenue Sharing, Competitive Balance and the Contest Success Function," FEMM Working Papers 08012, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  10. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  11. Nti, Kofi O., 2004. "Maximum efforts in contests with asymmetric valuations," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1059-1066, November.
  12. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
  13. Nirvikar Singh & Donald Wittman, 2001. "Contests where there is variation in the marginal productivity of effort," Economic Theory, Springer, vol. 18(3), pages 711-744.
  14. Stein, William E, 2002. " Asymmetric Rent-Seeking with More Than Two Contestants," Public Choice, Springer, vol. 113(3-4), pages 325-36, December.
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Citations

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Cited by:
  1. Franke, Jörg & Kanzow, Christian & Leininger, Wolfgang & Schwartz, Alexandra, 2014. "Lottery versus all-pay auction contests: A revenue dominance theorem," Games and Economic Behavior, Elsevier, vol. 83(C), pages 116-126.
  2. Epstein, Gil S. & Mealem, Yosef & Nitzan, Shmuel, 2012. "The Efficacy and Efforts of Interest Groups in Post Elections Policy Formation," IZA Discussion Papers 7031, Institute for the Study of Labor (IZA).
  3. Epstein, Gil S. & Mealem, Yosef & Nitzan, Shmuel, 2012. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," IZA Discussion Papers 7032, Institute for the Study of Labor (IZA).
  4. Yosef Mealem & Shmuel Nitzan, 2012. "Differential Prize Taxation and Structural Discrimination in Contests," CESifo Working Paper Series 3831, CESifo Group Munich.
  5. Jörg Franke & Wolfgang Leininger, 2013. "On the Efficient Provision of Public Goods by Means of Lotteries," Ruhr Economic Papers 0399, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  6. Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2013. "Agreeing on Efficient Emissions Reduction," CESifo Working Paper Series 4345, CESifo Group Munich.
  7. Yosef Mealem & Shmuel Nitzan, 2013. "Direct and Structural Discrimination in Contests," CESifo Working Paper Series 4518, CESifo Group Munich.
  8. Ezra Einy & Ori Haimanko & Diego Moreno & A. Sela & Benyamin Shitovitz, 2013. "Tullock contests with asymmetric information," Economics Working Papers we1314, Universidad Carlos III, Departamento de Economía.
  9. Einy, E & Haimanko, O & Moreno, D & Sela, A & Shitovitz, B, 2013. "Tullock Contests with Asymmetric Information," Discussion Papers 2013-11, Graduate School of Economics, Hitotsubashi University.
  10. Epstein, Gil S. & Mealem, Yosef, 2013. "Politicians, Governed vs. Non-Governed Interest Groups and Rent Dissipation," IZA Discussion Papers 7736, Institute for the Study of Labor (IZA).
  11. Ezra Einy & Ori Haimanko & Diego Moreno & Aner Sela & Benyamin Shitovitz, 2013. "Tullock Contests With Asymmetric Information," Working Papers 1303, Ben-Gurion University of the Negev, Department of Economics.
  12. Dahm, Matthias & Esteve, Patrícia,, 2013. "Affirmative Action through Extra Prizes," Working Papers 2072/222197, Universitat Rovira i Virgili, Department of Economics.

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