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Payoff Shares in Two-Player Contests

Author

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  • Häfner, Samuel

    () (University of Basel)

  • Nöldeke, Georg

    () (University of Basel)

Abstract

In contest models with symmetric valuations, equilibrium payoffs are positive shares of the value of the prize. In contrast to a bargaining situation, these shares sum to less than one because a share of the value is lost due to rentdissipation. We ask: can every such division into payoff shares arise as the outcome of the unique pure-strategy Nash equilibrium of a simple asymmetric contest in which contestants differ in the effectiveness of their efforts? For two-player contests the answer is shown to be positive.

Suggested Citation

  • Häfner, Samuel & Nöldeke, Georg, 2014. "Payoff Shares in Two-Player Contests," Working papers 2014/11, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2014/11
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    References listed on IDEAS

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    1. 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.
    2. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
    3. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475.
    4. Nti, Kofi O, 1997. "Comparative Statics of Contests and Rent-Seeking Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 43-59, February.
    5. 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.
    6. Perez-Castrillo, J David & Verdier, Thierry, 1992. "A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-350, April.
    7. 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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    More about this item

    Keywords

    Contests; Pure-Strategy Equilibrium; Rent-Dissipation;

    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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