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Contests with Size Effects

Author

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  • Wolfgang Eggert
  • Martin Kolmar

Abstract

In this paper we analyze the structure of contest equilibria with a variable number of individuals. First we analyze a situation where the total prize depends on the number of agents and where every single agent faces opportunity costs of investing in the contest. Second we analyze a situation where the agents face a trade-off between productive and appropriative investments. Here, the number of agents may also influence the productivity of productive investments. It turns out that both types of contests may lead to opposing results concerning the optimal number of individuals depending on the strength of size effects. Whereas in the former case individual utility is u-shaped when the number of agents increases, the opposite holds true for the latter case. We discuss the implications of our findings for the case of anarchic societies and competition on markets.

Suggested Citation

  • Wolfgang Eggert & Martin Kolmar, 2004. "Contests with Size Effects," CESifo Working Paper Series 1346, CESifo.
  • Handle: RePEc:ces:ceswps:_1346
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    References listed on IDEAS

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    1. Huck, Steffen & Konrad, Kai A. & Muller, Wieland, 2001. "Divisionalization in contests," Economics Letters, Elsevier, vol. 70(1), pages 89-93, January.
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    Cited by:

    1. Hutchison, Michael M & Noy, Ilan, 2005. "How Bad Are Twins? Output Costs of Currency and Banking Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 725-752, August.
    2. Kräkel, Matthias, 2012. "Competitive careers as a way to mediocracy," European Journal of Political Economy, Elsevier, vol. 28(1), pages 76-87.
    3. Giebe, Thomas & Schweinzer, Paul, 2014. "Consuming your way to efficiency: Public goods provision through non-distortionary tax lotteries," European Journal of Political Economy, Elsevier, vol. 36(C), pages 1-12.
    4. Sung-Hoon Park, 2019. "The gap between equilibrium expected payoffs in contests with linear externalities," Economics Bulletin, AccessEcon, vol. 39(4), pages 2302-2307.
    5. Sung-Hoon Park & Jason F. Shogren, 2021. "A Virtuous Circle of Governance Contests with Externalities," Sustainability, MDPI, vol. 13(14), pages 1-12, July.
    6. Lotem Ikan & David Lagziel, 2023. "The Indoctrination Game," Papers 2305.02604, arXiv.org.

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    More about this item

    Keywords

    size effects; contests; anarchy; competition;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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