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Contests with general preferences

Author

Listed:
  • Alex Dickson

    () (Department of Economics, University of Strathclyde)

  • Ian A MacKenzie

    () (School of Economics, University of Queensland)

  • Petros Sekeris

    () (Department of Economics & Finance, University of Portsmouth)

Abstract

This article investigates contests when heterogeneous players compete to obtain a share of a prize. We prove the existence and uniqueness of the Nash equilibrium when players have general preference structures. Our results show that many of the standard conclusions obtained in the analysis of contests - such as aggregate effort increasing in the size of the prize and the dissipation ratio invariant to the size of the prize - may no longer hold under a general preference setting. We derive the key conditions on preferences, which involve the rate of change of the marginal rate of substitution between a player's share of the prize and their effort within the contest, under which these counter-intuitive results may hold. Our approach is able to nest conventional contest analysis - the study of (quasi-)linear preferences - as well as allowing for a much broader class of utility functions, which include both separable and non-separable utility structures.

Suggested Citation

  • Alex Dickson & Ian A MacKenzie & Petros Sekeris, 2016. "Contests with general preferences," Working Papers 1608, University of Strathclyde Business School, Department of Economics.
  • Handle: RePEc:str:wpaper:1608
    as

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    File URL: http://www.strath.ac.uk/media/1newwebsite/departmentsubject/economics/research/researchdiscussionpapers/16-08.pdf
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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. Hillman, Arye L & Katz, Eliakim, 1984. "Risk-Averse Rent Seekers and the Social Cost of Monopoly Power," Economic Journal, Royal Economic Society, vol. 94(373), pages 104-110, March.
    3. Richard Cornes & Roger Hartley, 2005. "Asymmetric contests with general technologies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(4), pages 923-946, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    contest; general preferences; aggregative game;

    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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