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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 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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Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 02-04.

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Handle: RePEc:kud:epruwp:02-04

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  1. Assaf Razin & Efraim Sadka, 1995. "Population Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262181606, December.
  2. Cornes, Richard & Hartley, Roger, 2003. " Risk Aversion, Heterogeneity and Contests," Public Choice, Springer, vol. 117(1-2), pages 1-25, October.
  3. Herschel I. Grossman, 2001. "The Creation of Effective Property Rights," American Economic Review, American Economic Association, vol. 91(2), pages 347-352, May.
  4. George E. Monahan, 1987. "The Structure of Equilibria in Market Share Attraction Models," Management Science, INFORMS, vol. 33(2), pages 228-243, February.
  5. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, vol. 54(1), pages 63-82, January.
  6. Grossman, Herschel I., 2002. ""Make us a king": anarchy, predation, and the state," European Journal of Political Economy, Elsevier, vol. 18(1), pages 31-46, March.
  7. Grossman, Herschel I., 1995. "Robin hood and the redistribution of property income," European Journal of Political Economy, Elsevier, vol. 11(3), pages 399-410, September.
  8. Skaperdas, S., 1991. "Cooperation, Conflict And Power In The Absence Of Property Rights," Papers 90-91-06a, California Irvine - School of Social Sciences.
  9. Noh, Suk Jae, 2002. "Resource distribution and stable alliances with endogenous sharing rules," European Journal of Political Economy, Elsevier, vol. 18(1), pages 129-151, March.
  10. Schmalensee, Richard, 1976. "A Model of Promotional Competition in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 493-507, October.
  11. Bush, Winston C. & Mayer, Lawrence S., 1974. "Some implications of anarchy for the distribution of property," Journal of Economic Theory, Elsevier, vol. 8(4), pages 401-412, August.
  12. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
  13. 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, vol. 103(6), pages 1275-88, December.
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Cited by:
  1. Kräkel, Matthias, 2009. "Competitive Careers as a Way to Mediocracy," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 286, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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