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A New Approach to Contest Models

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  • Fausto, Cavalli
  • Mario, Gilli
  • Ahmad, Naimzada

Abstract

The purpose of this paper is to propose a symmetric two player general contest model in order to study the relationship between equilibria and crucial structural parameters of the model. In particular, given a general specification of the players’ set of possible entries, of the agents’ utility functions, and of the rules that presides over outcomes, we aim to analyze the characteristics of the set of equilibria as a function of structural characteristics of the contest technology and of the outcome function. Focusing on three main cases, we study the effect of introducing spillover in the marginal productivity of agents’ efforts and in the polarization between agents’ goals. Firstly, we show that without spillover the equilibrium efforts’ intensity is uniquely connected to the ratio between marginal productivity of effort and polarization. Secondly, we are able to connect existence of multiple symmetric and asymmetric equilibria to the intensity of spillover effects into outcomes. Finally, we show that spillover in contest technology can imply the non-existence of equilibria.

Suggested Citation

  • Fausto, Cavalli & Mario, Gilli & Ahmad, Naimzada, 2017. "A New Approach to Contest Models," Working Papers 364, University of Milano-Bicocca, Department of Economics, revised 03 Mar 2017.
  • Handle: RePEc:mib:wpaper:364
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    References listed on IDEAS

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    1. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
    2. Hugh Neary, 1997. "A comparison of rent-seeking models and economic models of conflict," Public Choice, Springer, vol. 93(3), pages 373-388, December.
    3. Hirshleifer, Jack & Osborne, Evan, 2001. "Truth, Effort, and the Legal Battle," Public Choice, Springer, vol. 108(1-2), pages 169-195, July.
    4. Perez-Castrillo, J David & Verdier, Thierry, 1992. "A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-350, April.
    5. Kjell Hausken, 2005. "Production and Conflict Models Versus Rent-Seeking Models," Public Choice, Springer, vol. 123(1), pages 59-93, April.
    6. Neary, Hugh M, 1997. "A Comparison of Rent-Seeking Models and Economic Models of Conflict," Public Choice, Springer, vol. 93(3-4), pages 373-388, December.
    7. Riaz, Khalid & Shogren, Jason F & Johnson, Stanley R, 1995. "A General Model of Rent Seeking for Public Goods," Public Choice, Springer, vol. 82(3-4), pages 243-259, March.
    8. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    9. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
    10. Durham, Yvonne & Hirshleifer, Jack & Smith, Vernon L., 2008. "The Paradox of Power," Handbook of Experimental Economics Results, Elsevier.
    11. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
    12. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
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    More about this item

    Keywords

    symmetric contest; multiple equilibria; symmetric and asymmetric equilibria;

    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
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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