Why the Olympics have three prizes and not just one
There are at least two reasons why multiple prizes can be optimal in symmetric imperfectly discriminating contests. First, the introduction of multiple prizes reduces the standard deviation of contestantsï¿½ effort in asymmetric equilibria, when the majority of contestants actively participate in competition. Second, the introduction of multiple prizes may increase the aggregate (average) effort contributed in the contest. When more of a total prize fund is shifted away from the first prize, on the one hand, the active contestants obtain an incentive to reduce their individual effort, but, on the other hand, the number of active contestants may increase. Therefore, the aggregate (average) effort may increase when the number of active contestants in equilibrium increases.
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- Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993.
"The Solution to the Tullock Rent-Seeking Game when R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates,"
10-93-9, Pennsylvania State - Department of Economics.
- Baye, M.R. & Kovenock, D., 1993. "The Solution of the Tullock Rent-Seeking Game when R > 2 : Mixed-Strategy Equilibria and Mean Dissipation Rates," Discussion Paper 1993-68, Tilburg University, Center for Economic Research.
- Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when r>2: Mixed-Strategy Equilibria and Mean Dissipation Rates," Purdue University Economics Working Papers 1039, Purdue University, Department of Economics.
- Baye, M.R. & Kovenock, D., 1993. "The Solution to the Tullock Rent-Seeking Game When R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 9368, Tilburg - Center for Economic Research.
- Perez-Castrillo, J David & Verdier, Thierry, 1992. "A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-350, April.
- Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
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