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Contests with Size Effects

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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.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1346.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1346

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Keywords: size effects; contests; anarchy; competition;

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References

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  1. Herschel Grossman, 2000. "The Creation of Effective Property Rights," Working Papers, Brown University, Department of Economics 2000-15, Brown University, Department of Economics.
  2. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(1), pages 26-52, February.
  3. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, Springer, vol. 54(1), pages 63-82, January.
  4. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 720-39, September.
  5. Assaf Razin & Efraim Sadka, 1995. "Population Economics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262181606, December.
  6. Grossman, Herschel I., 2002. ""Make us a king": anarchy, predation, and the state," European Journal of Political Economy, Elsevier, Elsevier, vol. 18(1), pages 31-46, March.
  7. Schmalensee, Richard, 1976. "A Model of Promotional Competition in Oligopoly," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(3), pages 493-507, October.
  8. George E. Monahan, 1987. "The Structure of Equilibria in Market Share Attraction Models," Management Science, INFORMS, INFORMS, vol. 33(2), pages 228-243, February.
  9. Noh, Suk Jae, 2002. "Resource distribution and stable alliances with endogenous sharing rules," European Journal of Political Economy, Elsevier, Elsevier, vol. 18(1), pages 129-151, March.
  10. Grossman, Herschel I., 1995. "Robin hood and the redistribution of property income," European Journal of Political Economy, Elsevier, Elsevier, vol. 11(3), pages 399-410, September.
  11. Cornes, Richard & Hartley, Roger, 2003. " Risk Aversion, Heterogeneity and Contests," Public Choice, Springer, Springer, vol. 117(1-2), pages 1-25, October.
  12. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  13. Bush, Winston C. & Mayer, Lawrence S., 1974. "Some implications of anarchy for the distribution of property," Journal of Economic Theory, Elsevier, Elsevier, vol. 8(4), pages 401-412, August.
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Cited by:
  1. Matthias Kräkel, 2009. "Competitive Careers as a Way to Mediocracy," Bonn Econ Discussion Papers, University of Bonn, Germany bgse25_2009, University of Bonn, Germany.

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