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Payoff Shares in Two-Player Contests

Author

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  • Samuel Häfner

    (Faculty of Business and Economics, University of Basel, Peter Merian-Weg 6, Basel 4002, Switzerland)

  • Georg Nöldeke

    (Faculty of Business and Economics, University of Basel, Peter Merian-Weg 6, Basel 4002, Switzerland)

Abstract

In imperfectly discriminating contests with symmetric valuations, equilibrium payoffs are positive shares of the value of the prize. In contrast to a bargaining situation, players’ shares sum to less than one because a residual share of the value is lost due to rent dissipation. In this paper, we consider contests with two players and investigate the relationship between these equilibrium shares and the parameters of a class of asymmetric Tullock contest success functions. Our main finding is that any players’ shares that sum up to less than one can arise as the unique outcome of a pure-strategy Nash equilibrium for appropriate parameters.

Suggested Citation

  • Samuel Häfner & Georg Nöldeke, 2016. "Payoff Shares in Two-Player Contests," Games, MDPI, vol. 7(3), pages 1-7, September.
    • Handle: RePEc:gam:jgames:v:7:y:2016:i:3:p:25-:d:77845
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    References listed on IDEAS

    as
    1. J. David Pérez-Castrillo & Thierry Verdier, 1992. "A general analysis of rent-seeking games," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 133-148, Springer.
    2. Dasgupta, Ani & Nti, Kofi O., 1998. "Designing an optimal contest," European Journal of Political Economy, Elsevier, vol. 14(4), pages 587-603, November.
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    4. Richard Cornes & Roger Hartley, 2005. "Asymmetric contests with general technologies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(4), pages 923-946, November.
    5. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
    6. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475.
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    More about this item

    Keywords

    contests; pure-strategy equilibrium; rent-dissipation;
    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
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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