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A Micro- Foundation for Non-Deterministic Contests of the Logit Form

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  • Matthias Dahm
  • Nicolas Porteiro

Abstract

In models of non-deterministic contest, players exert irreversible effort in order to increase their probability of winning a prize. The most prominent functional form of the win probability in the literature is the so-called “logit” contest success function. We provide a simple micro-foundation of this function for the two contestant case. In this setting the contest administrator is a rational decision maker whose optimal choice is deterministic. However, from the point of view of the contestants the outcome of the contest is probabilistic because of an underlying uncertainty about the type of the administrator.

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Bibliographic Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1410.

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Date of creation: Jul 2005
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Handle: RePEc:nwu:cmsems:1410

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Keywords: Contests; Contest Success Function; Effort levels; Endogenous Contest.;

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  1. Matthias Dahm & Nicolás Porteiro, 2006. "Biased Contests," Working Papers 06.21, Universidad Pablo de Olavide, Department of Economics.
  2. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer, vol. 8(2), pages 291-305.
  3. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "Rigging The Lobbying Process: An Application Of The All- Pay Auction," Purdue University Economics Working Papers 1002, Purdue University, Department of Economics.
  4. Christian Riis & Derek J. Clark, 1997. "Contest success functions: an extension," Economic Theory, Springer, vol. 11(1), pages 201-204.
  5. Che,Y.K. & Gale,I., 1998. "Difference-form contests and the robustness of all-pay auctions," Working papers 6, Wisconsin Madison - Social Systems.
  6. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
  7. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  8. Amegashie, J.A., 2003. "A Contest Success Function with a Tractable Noise Parameter," Working Papers 2003-5, University of Guelph, Department of Economics and Finance.
  9. J. Amegashie, 2006. "A contest success function with a tractable noise parameter," Public Choice, Springer, vol. 126(1), pages 135-144, January.
  10. Baik, Kyung Hwan, 1998. "Difference-form contest success functions and effort levels in contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 685-701, November.
  11. Walter Trockel, 2000. "Implementations of the Nash solution based on its Walrasian characterization," Economic Theory, Springer, vol. 16(2), pages 277-294.
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Cited by:
  1. Pelosse, Yohan, 2011. "Equivalence of optimal noisy-ranking contests and Tullock contests," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 740-748.

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