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Optimal Contest Design When The Designer's Payoff Depends On Competitive Balance

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  • Marco Runkel

Abstract

This paper investigates optimal contest design when the designer’s payoff is increasing in competitive balance between contestants. A two-player contest with asymmetric effort costs (asymmetric abilities) is considered. Competitive balance is measured by the difference in winning probabilities of the contestants. In contrast to previous studies, the impact of competitive balance on the optimal prize is not unique, but depends on the shape of the contest success function. Furthermore, it is shown that including competitive balance in the designer’s objective may induce the designer to increase the contestants‘ effort costs, for example, by tightening the rules of the contest.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2004 with number 156.

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Date of creation: 17 Sep 2004
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Handle: RePEc:ecj:ac2004:156

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  1. Kohli, Inderjit & Singh, Nirvikar, 1999. " Rent Seeking and Rent Setting with Asymmetric Effectiveness of Lobbying," Public Choice, Springer, vol. 99(3-4), pages 275-98, June.
  2. Stein, William E, 2002. " Asymmetric Rent-Seeking with More Than Two Contestants," Public Choice, Springer, vol. 113(3-4), pages 325-36, December.
  3. Glazer, Amihai & Hassin, Refael, 1988. "Optimal Contests," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 133-43, January.
  4. Kofi O. Nti, 1999. "Stability in the patent race contest of Lee and Wilde," Economic Theory, Springer, vol. 14(1), pages 237-245.
  5. Amegashie, J Atsu, 2000. " Some Results on Rent-Seeking Contests with Shortlisting," Public Choice, Springer, vol. 105(3-4), pages 245-53, December.
  6. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
  7. Amegashie, J Atsu, 1999. " The Design of Rent-Seeking Competitions: Committees, Preliminary and Final Contests," Public Choice, Springer, vol. 99(1-2), pages 63-76, April.
  8. 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.
  9. Nirvikar Singh & Donald Wittman, 1988. "Economic Contests with Incomplete Information and Optimal Contest Design," Management Science, INFORMS, vol. 34(4), pages 528-540, April.
  10. Inderjit Kohli & Nirvikar Singh, 2001. "A Model of Inequality and Interest Group Politics," Economics and Politics, Wiley Blackwell, vol. 13(2), pages 185-200, 07.
  11. Dasgupta, Ani & Nti, Kofi O., 1998. "Designing an optimal contest," European Journal of Political Economy, Elsevier, vol. 14(4), pages 587-603, November.
  12. Gradstein, Mark, 1998. "Optimal contest design: volume and timing of rent seeking in contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 575-585, November.
  13. Gradstein, Mark & Konrad, Kai A, 1999. "Orchestrating Rent Seeking Contests," Economic Journal, Royal Economic Society, vol. 109(458), pages 536-45, October.
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Cited by:
  1. Camilla Mastromarco & Marco Runkel, 2009. "Rule changes and competitive balance in Formula One motor racing," Applied Economics, Taylor & Francis Journals, vol. 41(23), pages 3003-3014.

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