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Centralized versus decentralized contests with risk-averse players

Author

Listed:
  • Wang, Xiruo
  • Wu, Zenan
  • Zhu, Yuxuan

Abstract

We compare the total effort of centralized single-prize contests and decentralized single-prize contests, assuming risk-averse contestants. Decentralized contests outperform centralized contests when contestants are prudent and sufficiently risk averse. However, decentralized contests are never optimal if the designer can arrange centralized multi-prize contests. Contestants’ welfare is also discussed.

Suggested Citation

  • Wang, Xiruo & Wu, Zenan & Zhu, Yuxuan, 2020. "Centralized versus decentralized contests with risk-averse players," Economics Letters, Elsevier, vol. 186(C).
    • Handle: RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519304136
    DOI: 10.1016/j.econlet.2019.108816
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    References listed on IDEAS

    as
    1. Takeshi Yamazaki, 2009. "The uniqueness of pure-strategy Nash equilibrium in rent-seeking games with risk-averse players," Public Choice, Springer, vol. 139(3), pages 335-342, June.
    2. Fu, Qiang & Lu, Jingfeng, 2009. "The beauty of "bigness": On optimal design of multi-winner contests," Games and Economic Behavior, Elsevier, vol. 66(1), pages 146-161, May.
    3. Clark, Derek J & Riis, Christian, 1996. "A Multi-winner Nested Rent-Seeking Contest," Public Choice, Springer, vol. 87(1-2), pages 177-184, April.
    4. Clark, Derek J. & Riis, Christian, 1998. "Influence and the discretionary allocation of several prizes," European Journal of Political Economy, Elsevier, vol. 14(4), pages 605-625, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Risk aversion; Tullock contests; Centralization; Decentralization; Multiple prizes;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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