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The optimal prize structure of symmetric Tullock contests

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  • Paul Schweinzer

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  • Ella Segev

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Abstract

We show that the optimal prize structure of symmetric n-player Tullock tournaments assigns the entire prize pool to the winner, provided that a symmetric pure strategy equilibrium exists. If such an equilibrium fails to exist under the winner-take-all structure, we construct the optimal prize structure which improves existence conditions by dampening efforts. If no such optimal equilibrium exists, no symmetric pure strategy equilibrium induces positive efforts. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Paul Schweinzer & Ella Segev, 2012. "The optimal prize structure of symmetric Tullock contests," Public Choice, Springer, vol. 153(1), pages 69-82, October.
  • Handle: RePEc:kap:pubcho:v:153:y:2012:i:1:p:69-82
    DOI: 10.1007/s11127-011-9774-2
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    References listed on IDEAS

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    1. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
    2. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, January.
    3. Gershkov, Alex & Perry, Motty, 2009. "Tournaments with midterm reviews," Games and Economic Behavior, Elsevier, vol. 66(1), pages 162-190, May.
    4. Szymanski, Stefan & Valletti, Tommaso M., 2005. "Incentive effects of second prizes," European Journal of Political Economy, Elsevier, vol. 21(2), pages 467-481, June.
    5. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    6. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1999. "The Incidence of Overdissipation in Rent-Seeking Contests," Public Choice, Springer, vol. 99(3-4), pages 439-454, June.
    7. 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.
    8. Hao Jia, 2008. "A stochastic derivation of the ratio form of contest success functions," Public Choice, Springer, vol. 135(3), pages 125-130, June.
    9. 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.
    10. Barut, Yasar & Kovenock, Dan, 1998. "The symmetric multiple prize all-pay auction with complete information," European Journal of Political Economy, Elsevier, vol. 14(4), pages 627-644, November.
    11. Clark, Derek J & Riis, Christian, 1996. "A Multi-winner Nested Rent-Seeking Contest," Public Choice, Springer, vol. 87(1-2), pages 177-184, April.
    12. 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.
    13. Baye, M.R. & Kovenock, D., 1993. "The Solution to the Tullock Rent-Seeking Game When R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 9368, Tilburg - Center for Economic Research.
    14. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
    15. Clark, Derek J & Riis, Christian, 1998. "Competition over More Than One Prize," American Economic Review, American Economic Association, vol. 88(1), pages 276-289, March.
    16. Alcalde, José & Dahm, Matthias, 2010. "Rent seeking and rent dissipation: A neutrality result," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 1-7, February.
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    More about this item

    Keywords

    Tournaments; Incentive structures; Rent seeking; C7; D72; J31;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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