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Financial Constraints and Multivariate Incomplete Information in the Mixture Model of Contests

Author

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  • Rene Kirkegaard

    (Department of Economics and Finance, University of Guelph, Guelph ON Canada)

Abstract

A general mixture model of contests is introduced. The contest combines multivariate adverse selection with moral hazard in the form of stochastic per-formance. Incomplete information does not add to the dimensionality of the problem, and actions are unambiguously strategic substitutes when technolo-gies are homogenous. These properties facilitate tractable comparative statics with respect to changes in the multivariate type distribution. Hence, the role of the dependence structure between di¤erent characteristics can be explored. To illustrate, if valuations and budgets become more positively dependent, then each type’s expenditure decreases but expected performance increases. With asymmetric agents, the exclusion principle can be reversed.

Suggested Citation

  • Rene Kirkegaard, 2023. "Financial Constraints and Multivariate Incomplete Information in the Mixture Model of Contests," Working Papers 2402, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2024-02
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    More about this item

    Keywords

    Contests; exclusion principle; supermodular order.;
    All these keywords.

    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
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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