Contests with Size Effects
AbstractIn this paper we analyze the structure of contest equilibria with a variable number of agents. 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 tyes of contests may lead to opposing results concerning the optimal numnber of contestants depending on the strength of size effects. Whereas in the former case individual utility is J-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 competition on markets and for the case fo unstable property rights.
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Other versions of this item:
- Wolfgang Eggert & Martin Kolmar, 2005. "Contests with Size Effects," Ifo Working Paper Series Ifo Working Paper No. 2, Ifo Institute for Economic Research at the University of Munich.
- Wolfgang Eggert & Martin Kolmar, 2004. "Contests with Size Effects," CESifo Working Paper Series 1346, CESifo Group Munich.
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
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