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Prize Sharing in Collective Contests

  • Shmuel Nitzan
  • Kaoru Ueda

The characteristics of endogenously determined sharing rules and the group-size paradox are studied in a model of group contest with the following features: (i) The prize has mixed private-public good characteristics. (ii) Groups can differ in marginal cost of effort and their membership size. (iii) In each group the members decide how much effort to put without observing the sharing rules of the other groups. It is shown that endogenous determination of group sharing rules completely eliminates the group-size paradox, i.e. a larger group always attains a higher winning probability than a smaller group, unless the prize is purely private. In addition, an interesting pattern of equilibrium group sharing rules is revealed: the group attaining the lower winning probability is the one choosing the rule giving higher incentives to the members.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3212.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3212
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  1. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
  2. Wärneryd, Karl, 1997. "Distributional Conflict and Jurisdictional Organization," SSE/EFI Working Paper Series in Economics and Finance 173, Stockholm School of Economics.
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  12. Katz, Eliakim & Tokatlidu, Julia, 1996. "Group competition for rents," European Journal of Political Economy, Elsevier, vol. 12(4), pages 599-607, December.
  13. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
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  15. Baik, Kyung Hwan & Lee, Sanghack, 2007. "Collective rent seeking when sharing rules are private information," European Journal of Political Economy, Elsevier, vol. 23(3), pages 768-776, September.
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  18. Konrad, Kai A., 2004. "Bidding in hierarchies," European Economic Review, Elsevier, vol. 48(6), pages 1301-1308, December.
  19. Kaoru Ueda, 2002. "Oligopolization in collective rent-seeking," Social Choice and Welfare, Springer, vol. 19(3), pages 613-626.
  20. Baik, Kyung Hwan & Kim, In-Gyu & Na, Sunghyun, 2001. "Bidding for a group-specific public-good prize," Journal of Public Economics, Elsevier, vol. 82(3), pages 415-429, December.
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