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Risk aversion in symmetric and asymmetric contests

  • Richard Cornes
  • Roger Hartley

We analyze existence, uniqueness and properties of equilibria in incompletely discriminating Tullock contests with logistic contest success functions, when contestants are risk averse. We prove that a Nash equilibrium for such a contest exists, but give an example of a symmetric contest with both symmetric and asymmetric equilibria, showing that risk aversion may lead to multiple equilibria. Symmetric contests have unique symmetric equilibria but additional conditions are necessary for general uniqueness. We also study the effects on incumbents of additional competitors entering the contest under these conditions and examine the effects of risk aversion on rent dissipation in symmetric and asymmetric contests. Copyright Springer-Verlag 2012

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File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/economics/discussionpapers/EDP-0806.pdf
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Paper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 0806.

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Date of creation: 2008
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Handle: RePEc:man:sespap:0806
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Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/

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  5. Millner, Edward L & Pratt, Michael D, 1991. " Risk Aversion and Rent-Seeking: An Extension and Some Experimental Evidence," Public Choice, Springer, vol. 69(1), pages 81-92, February.
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  10. Richard Cornes & Roger Hartley, 2005. "Asymmetric contests with general technologies," Economic Theory, Springer, vol. 26(4), pages 923-946, November.
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  12. Bamon, Rodrigo & Fraysse, Jean, 1985. "Existence of Cournot Equilibrium in Large Markets," Econometrica, Econometric Society, vol. 53(3), pages 587-97, May.
  13. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, March.
  14. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 1-26, January.
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  17. Konrad, Kai A & Schlesinger, Harris, 1997. "Risk Aversion in Rent-Seeking and Rent-Augmenting Games," Economic Journal, Royal Economic Society, vol. 107(445), pages 1671-83, November.
  18. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
  19. Gradstein, Mark & Nitzan, Shmuel & Slutsky, Steven, 1992. "The Effect of Uncertainty on Interactive Behaviour," Economic Journal, Royal Economic Society, vol. 102(412), pages 554-61, May.
  20. Nti, Kofi O, 1997. "Comparative Statics of Contests and Rent-Seeking Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 43-59, February.
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  23. Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
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