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Cooperation, Competition and Entry in a Tullock Contest

Author

Listed:
  • GRANDJEAN, G.
  • TELLONE, D.
  • VERGOTE, W.

    (Université catholique de Louvain, CORE, Belgium)

Abstract

We propose a model of network formation in a Tullock contest. Agents first form their partnerships and then choose their investment in the contest. While a link improves the strength of an agent, it also improves the position of her rival. It is thus not obvious that they decide to cooperate. We characterize all pairwise equilibrium networks and find that the network formation process can act as a barrier to entry to the contest. We then analyze the impact of network formation on total surplus and find that a social planner can increase total surplus by creating more asymmetry between agents, as long as this does not reduce the number of participating agents. We show that barriers to entry may either hurt total surplus, as the winner of the prize does not exploit all the possible network benefits, or improve total surplus since less rent is dissipated when competition becomes less fierce. Finally, when networking acts as an endogenous barrier to entry, no pairwise equilibrium network is efficient.

Suggested Citation

  • Grandjean, G. & Tellone, D. & Vergote, W., 2016. "Cooperation, Competition and Entry in a Tullock Contest," CORE Discussion Papers 2016032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2016032
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    References listed on IDEAS

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    Cited by:

    1. Alexander Matros & David Michael Rietzke, 2017. "Contests on Networks," Working Papers 156630581, Lancaster University Management School, Economics Department.

    More about this item

    Keywords

    Network Formation; Tullock Contest; Participation Constraints; Efficiency;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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