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Contest Functions: Theoretical Foundations and Issues in Estimation

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  • Hao Jia

    (School of Accounting, Economics and Finance, Deakin University)

  • Stergios Skaperdas

    (Department of Economics, University of California-Irvine)

  • Samarth Vaidya

    (School of Accounting, Economics and Finance, Deakin University University)

Abstract

Contest functions (alternatively, contest success functions) determine probabilities of winning and losing as a function of contestants’ e ort. They are used widely in many areas of economics that employ contest games, from tournaments and rent-seeking to conflict and sports. We first examine the theoretical foundations of contest functions and classify them into four types of derivation: stochastic, axiomatic, optimally-derived, and microfounded. The additive form (which includes the ratio or "Tullock" functional form) can be derived in all four di erent ways. We also explore issues in the econometric estimation of contest functions, including concerns with data, endogeneity, and model comparison.

Suggested Citation

  • Hao Jia & Stergios Skaperdas & Samarth Vaidya, 2012. "Contest Functions: Theoretical Foundations and Issues in Estimation," Working Papers 111214, University of California-Irvine, Department of Economics.
    • Handle: RePEc:irv:wpaper:111214
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    More about this item

    Keywords

    Rent-seeking; Conflict; Tournaments; Litigation; Advertising;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • 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
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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