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Why the Olympics have three prizes and not just one

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  • Pavlo Blavatskyy

Abstract

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 contestants� 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.

Suggested Citation

  • Pavlo Blavatskyy, "undated". "Why the Olympics have three prizes and not just one," IEW - Working Papers 200, Institute for Empirical Research in Economics - University of Zurich.
  • Handle: RePEc:zur:iewwpx:200
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    File URL: http://www.econ.uzh.ch/static/wp_iew/iewwp200.pdf
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    References listed on IDEAS

    as
    1. Perez-Castrillo, J David & Verdier, Thierry, 1992. "A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-350, April.
    2. 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," Papers 10-93-9, Pennsylvania State - Department of Economics.
    3. 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.
    4. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why three medals at the Olympics?
      by Economic Logician in Economic Logic on 2008-08-11 14:26:00

    More about this item

    Keywords

    symmetric contest; imperfectly discriminating contest; logit; asymmetric equilibria; prize structure; sport;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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