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Endogenous contest success functions: a mechanism design approach

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  • Leonid Polishchuk

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  • Alexander Tonis

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Abstract

We describe optimal contest success functions (CSF) which maximize expected revenues of an administrator who allocates under informational asymmetry a source of rent among competing bidders. It is shown that in the case of independent private values rent administrator’s optimal mechanism can always be implemented via some CSFs as posited by Tullock. Optimal endogenous CSFs have properties which are often assumed a priori as plausible features of rent-seeking contests; the paper therefore validates such assumptions for a broad class of contests. Various extensions or optimal CSFs are analyzed. Copyright Springer-Verlag 2013

Suggested Citation

  • Leonid Polishchuk & Alexander Tonis, 2013. "Endogenous contest success functions: a mechanism design approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(1), pages 271-297, January.
  • Handle: RePEc:spr:joecth:v:52:y:2013:i:1:p:271-297
    DOI: 10.1007/s00199-011-0622-x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cubel, María & Sanchez-Pages, Santiago, 2016. "An axiomatization of difference-form contest success functions," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 92-105.
    2. María Cubel & Santiago Sanchez-Pages, 2014. "Difference-form group contests," Working Papers 2014/6, Institut d'Economia de Barcelona (IEB).
    3. Sakshi Gupta & Ram Singh, 2018. "On Existence and Properties of Pure-strategy Equilibria under Contests," Working Papers id:12840, eSocialSciences.
    4. J. Atsu Amegashie, 2012. "A Nested Contest: Tullock Meets the All-pay Auction," CESifo Working Paper Series 3976, CESifo Group Munich.
    5. Thomas Giebe & Paul Schweinzer, 2012. "Fuzzy Price-Quality Ratio Procurement under Incomplete Information," Discussion Papers 12/26, Department of Economics, University of York.
    6. Liu, Xuyuan & Lu, Jingfeng, 2017. "Optimal prize-rationing strategy in all-pay contests with incomplete information," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 57-90.
    7. Giebe, Thomas, 2014. "Innovation contests with entry auction," Journal of Mathematical Economics, Elsevier, vol. 55(C), pages 165-176.
    8. Jean-Daniel Guigou & Bruno Lovat & Marc Boissaux, 2013. "Asymmetric contests with risky rents," LSF Research Working Paper Series 13-9, Luxembourg School of Finance, University of Luxembourg.
    9. Sanchez-Pages, Santiago & Cubel, Maria, 2015. "An axiomatization of difference-form contest success functions," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-49, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. repec:eee:jetheo:v:175:y:2018:i:c:p:291-317 is not listed on IDEAS
    11. Subhasish Chowdhury & Roman Sheremeta, 2015. "Strategically equivalent contests," Theory and Decision, Springer, vol. 78(4), pages 587-601, April.
    12. repec:spr:jogath:v:47:y:2018:i:3:d:10.1007_s00182-017-0610-x is not listed on IDEAS
    13. Thomas Giebe & Paul Schweinzer, 2015. "Probabilistic procurement auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 19(1), pages 25-46, March.
    14. Sakshi Gupta & Ram Singh, 2018. "On Existence and Properties of Pure-strategy Equilibria under Contests," Working papers 288, Centre for Development Economics, Delhi School of Economics.
    15. María Cubel & Santiago Sanchez-Pages, 2014. "Difference-form group contests," Working Papers 2014/6, Institut d'Economia de Barcelona (IEB).
    16. repec:luc:wpaper:13-9 is not listed on IDEAS

    More about this item

    Keywords

    Rent seeking; Contest success functions; Asymmetric information; Bayesian mechanism design; D72; D82; C73;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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