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Effort maximization in asymmetric contest games with heterogeneous contestants

  • Jörg Franke

    ()

  • Christian Kanzow

    ()

  • Wolfgang Leininger

    ()

  • Alexandra Schwartz

    ()

Contest rules are set up by administrators who frequently have discretionary power in specifying the details of these rules, i.e., they can bias the contest rules toward specific contestants in order to further their prime objective. We derive the optimal bias of the contest rule for a contest administrator, who is interested in maximizing the total efforts expended in the contest. The solution is obtained in closed form for a widely used class of n-person contest games. Setting the optimal bias has important implications: (i) there is never exclusion of strong players, instead there is (endogenously induced) inclusion of weak contestants; (ii) the contest administrator will optimally level the playing field by encouraging weak contestants, but he will not equalize the contestants’ chances unless they are identical; and (iii) at least three contestants will be active in equilibrium of the optimal contest, irrespective of heterogeneity. Copyright Springer-Verlag 2013

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File URL: http://hdl.handle.net/10.1007/s00199-011-0657-z
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 52 (2013)
Issue (Month): 2 (March)
Pages: 589-630

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Handle: RePEc:spr:joecth:v:52:y:2013:i:2:p:589-630
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  1. Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2010. "Political Culture and Discrimination in Contests," Working Papers 2010-18, Bar-Ilan University, Department of Economics.
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  11. Franke, Jörg, 2012. "Affirmative action in contest games," European Journal of Political Economy, Elsevier, vol. 28(1), pages 105-118.
  12. Hao Jia, 2008. "A stochastic derivation of the ratio form of contest success functions," Public Choice, Springer, vol. 135(3), pages 125-130, June.
  13. 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.
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  15. Richard Cornes & Roger Hartley, 2002. "Asymmetric Contests with General Technologies," Keele Economics Research Papers KERP 2002/22, Centre for Economic Research, Keele University.
  16. Luis Corchón & Matthias Dahm, 2010. "Foundations for contest success functions," Economic Theory, Springer, vol. 43(1), pages 81-98, April.
  17. 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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