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Optimal contest design, closeness and the contest success function

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  • Marco Runkel

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Abstract

This paper considers the optimal design of an asymmetric two-player contest when the designer’s payoff depends not only on performance of the contestants, but also on the closeness of the contest measured by the difference in winning probabilities. In contrast to previous studies, the impact of closeness on the optimal prize depends on the shape of the contest success function. Furthermore, including closeness in the designer’s objective may induce the designer to uniformly increase the contestants’ effort costs. A similar result is obtained in case the designer may handicap the stronger contestant, but an even contest is never optimal. Copyright Springer Science+Business Media, B.V. 2006

Suggested Citation

  • Marco Runkel, 2006. "Optimal contest design, closeness and the contest success function," Public Choice, Springer, vol. 129(1), pages 217-231, October.
  • Handle: RePEc:kap:pubcho:v:129:y:2006:i:1:p:217-231
    DOI: 10.1007/s11127-006-9030-3
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Epstein, Gil S. & Mealem, Yosef & Nitzan, Shmuel, 2011. "Political culture and discrimination in contests," Journal of Public Economics, Elsevier, vol. 95(1), pages 88-93.
    2. Epstein, Gil S. & Mealem, Yosef, 2013. "Politicians, Governed vs. Non-Governed Interest Groups and Rent Dissipation," IZA Discussion Papers 7736, Institute for the Study of Labor (IZA).
    3. repec:elg:eechap:15325_5 is not listed on IDEAS
    4. Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2013. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," Economics and Politics, Wiley Blackwell, vol. 25(1), pages 48-60, March.
    5. Derek Clark & Tore Nilssen, 2013. "Learning by doing in contests," Public Choice, Springer, vol. 156(1), pages 329-343, July.
    6. March, Christoph & Sahm, Marco, 2017. "Contests as selection mechanisms: The impact of risk aversion," BERG Working Paper Series 127, Bamberg University, Bamberg Economic Research Group.
    7. Brown, Alasdair & Chowdhury, Subhasish M., 2017. "The hidden perils of affirmative action: Sabotage in handicap contests," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 273-284.
    8. repec:eee:jeborg:v:150:y:2018:i:c:p:114-131 is not listed on IDEAS
    9. Dietl Helmut M & Lang Markus & Rathke Alexander, 2009. "The Effect of Salary Caps in Professional Team Sports on Social Welfare," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-23, April.
    10. Yosef Mealem & Shmuel Nitzan, 2016. "Discrimination in contests: a survey," Review of Economic Design, Springer;Society for Economic Design, vol. 20(2), pages 145-172, June.
    11. Marco Runkel, 2011. "Revenue Sharing, Competitive Balance and the Contest Success Function," German Economic Review, Verein für Socialpolitik, vol. 12(3), pages 256-273, August.
    12. Giuseppe Dari-Mattiacci & Eric Langlais & Bruno Lovat & Francesco Parisi, 2013. "Asymmetries in Rent-Seeking," EconomiX Working Papers 2013-5, University of Paris Nanterre, EconomiX.
    13. Marco Sahm, 2010. "The Contest Winner: Gifted or Venturesome?," CESifo Working Paper Series 3285, CESifo Group Munich.
    14. Gil Epstein & Yosef Mealem, 2015. "Politicians, governed versus non-governed interest groups and rent dissipation," Theory and Decision, Springer, vol. 79(1), pages 133-149, July.
    15. Einav Hart & Judith Avrahami & Yaakov Kareev & Peter M. Todd, 2014. "Investing Even in Uneven Contests: Effects of Asymmetry on Investment in Experimental All-Pay Contests," Discussion Paper Series dp660, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    16. Robert Ritz, 2008. "Influencing rent-seeking contests," Public Choice, Springer, vol. 135(3), pages 291-300, June.

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