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Effort Maximization in Asymmetric Contest Games with Heterogeneous Contestants

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  • Franke, Jörg
  • Kanzow, Christian
  • Leininger, Wolfgang
  • Schwartz, Alexandra

Abstract

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
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Franke, Jörg & Kanzow, Christian & Leininger, Wolfgang & Schwartz, Alexandra, 2013. "Effort Maximization in Asymmetric Contest Games with Heterogeneous Contestants," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 86028, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:86028
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/86028/
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    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

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