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Costly Participation and Default Allocations in All-Pay Contests

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  • Shelegia, Sandro
  • Wilson, Christopher

Abstract

Some important forms of contests have participation costs and 'default allocations' where the contest prize is still awarded even when no-one actively competes. We solve a general, all-pay contest model that allows for flexible forms of these features under arbitrary asymmetry. We then use our framework to better connect the literatures on contests and sales price competition, and use this connection to solve some long-standing problems. Finally, we analyze how participation costs and default allocations can be used as novel, practical tools in contest design. Throughout, the combined presence of participation costs and default allocations often reverse otherwise familiar intuitions.

Suggested Citation

  • Shelegia, Sandro & Wilson, Christopher, 2022. "Costly Participation and Default Allocations in All-Pay Contests," CEPR Discussion Papers 17611, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17611
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    More about this item

    Keywords

    Clearinghouse; Sales;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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