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"Reverse" Nested Lottery Contests

Author

Listed:
  • Qiang Fu

    () (Department of Strategy and Policy, National University of Singapore)

  • Jingfeng Lu

    () (Department of Economics, National University of Singapore)

  • Zhewei Wang

    () (School of Economics, Shandong University)

Abstract

This paper proposes a multi-prize "reverse" nested lottery contest model, which can be viewed as the "mirror image" of the conventional nested lottery contest of Clark and Riis (1996a). The reverse-lottery contest model determines winners by selecting losers based on contestants' one-shot effort through a hypothetical sequence of lotteries. We provide a microfoundation for the reverse-lottery contest from a perspective of (simultaneous) noisy performance ranking and establish that the model is underpinned by a unique performance evaluation rule. We further demonstrate that the noisy-ranking model can be interpreted intuitively as a "worst-shot" contest, in which contestants' performances are evaluated based on their most severe mistakes. The reverse-lottery contest model thus depicts a great variety of widely observed competitive activities of this nature. A handy closed-form solution for a symmetric equilibrium of the reverse-lottery contest is obtained. We show that the winner-take-all principle continues to hold in reverse-lottery contests. Moreover, we find that a reverse-lottery contest elicits more effort than a conventional lottery contest whenever the prizes available to contestants are relatively scarce.

Suggested Citation

  • Qiang Fu & Jingfeng Lu & Zhewei Wang, 2013. ""Reverse" Nested Lottery Contests," SDU Working Papers 2013-02, School of Economics, Shandong University.
  • Handle: RePEc:shn:wpaper:2013-02
    as

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    File URL: http://econ.sdu.edu.cn/RePEc/shn/wpaper/Reverse_Contests20130709.pdf
    File Function: July, 2013
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    References listed on IDEAS

    as
    1. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
    2. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
    3. Christian Riis & Derek J. Clark, 1997. "Contest success functions: an extension," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(1), pages 201-204.
    4. Paul Schweinzer & Ella Segev, 2012. "The optimal prize structure of symmetric Tullock contests," Public Choice, Springer, vol. 153(1), pages 69-82, October.
    5. Perez-Castrillo, J David & Verdier, Thierry, 1992. "A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-350, April.
    6. Gradstein, Mark & Konrad, Kai A, 1999. "Orchestrating Rent Seeking Contests," Economic Journal, Royal Economic Society, vol. 109(458), pages 536-545, October.
    7. Amegashie, J Atsu, 2000. "Some Results on Rent-Seeking Contests with Shortlisting," Public Choice, Springer, vol. 105(3-4), pages 245-253, December.
    8. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-715, September.
    9. Szymanski, Stefan & Valletti, Tommaso M., 2005. "Incentive effects of second prizes," European Journal of Political Economy, Elsevier, vol. 21(2), pages 467-481, June.
    10. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    11. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
    12. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
    13. Clark, D.J. & Riis, C., 1996. "On the Win Probability in Rent-Seeking Gemes," Memorandum 05/1996, Oslo University, Department of Economics.
    14. Fu, Qiang & Lu, Jingfeng, 2009. "The beauty of "bigness": On optimal design of multi-winner contests," Games and Economic Behavior, Elsevier, vol. 66(1), pages 146-161, May.
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    16. Hao Jia, 2008. "A stochastic derivation of the ratio form of contest success functions," Public Choice, Springer, vol. 135(3), pages 125-130, June.
    17. Clark, Derek J & Riis, Christian, 1996. "A Multi-winner Nested Rent-Seeking Contest," Public Choice, Springer, vol. 87(1-2), pages 177-184, April.
    18. Clark, Derek J. & Riis, Christian, 1998. "Influence and the discretionary allocation of several prizes," European Journal of Political Economy, Elsevier, vol. 14(4), pages 605-625, November.
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    Citations

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    Cited by:

    1. Vesperoni, Alberto, 2013. "A contest success function for rankings," NEPS Working Papers 8/2013, Network of European Peace Scientists.
    2. repec:shn:wpaper:2014-02 is not listed on IDEAS
    3. Lu, Jingfeng & Wang, Zhewei, 2015. "Axiomatizing multi-prize nested lottery contests: A complete and strict ranking perspective," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 127-141.
    4. Jingfeng Lu & Zhewei Wang, 2016. "Axiomatization of reverse nested lottery contests," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(4), pages 939-957, December.
    5. repec:eee:mateco:v:72:y:2017:i:c:p:25-35 is not listed on IDEAS
    6. Alberto Vesperoni, 2016. "A contest success function for rankings," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(4), pages 905-937, December.

    More about this item

    Keywords

    Contest Elimination Function; Imperfectly Discriminatory Contests; Least-Favorable Performance Ranking; Multi-Prize Contest.;

    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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