Abstract

In contest models with symmetric valuations, equilibrium payoffs are positive shares of the value of the prize. In contrast to a bargaining situation, these shares sum to less than one because a share of the value is lost due to rent-dissipation. We ask: can every such division into payoff shares arise as the outcome of the unique pure-strategy Nash equilibrium of a simple asymmetric contest in which contestants differ in the effectiveness of their efforts? For two-player contests the answer is shown to be positive.

Highlights

  • Contest theory deals with games in which players sink efforts in order to win some prize.A prominent application of the theory is rent-seeking, which goes back at least to the seminal contribution of Tullock [1]

  • We focus on contests with two players, and consider the class of asymmetric contest success functions having the form pi = αi xir /(α1 x1r + α2 x2r ), axiomatized in Clark and Riis [3]

  • ≥ 0, and u1∗ + u2∗ < v can arise as the unique equilibrium payoffs in a two-player contest with contest success function pi = αi xir /(α1 x1r + α2 x2r )

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Summary

Introduction

Contest theory deals with games in which players sink efforts in order to win some prize.A prominent application of the theory is rent-seeking, which goes back at least to the seminal contribution of Tullock [1]. We show that this class of contests is rich enough to support any positive payoffs for the players, summing to less than the value of the prize, as the outcome of a unique pure-strategy Nash equilibrium for appropriately chosen values of the effectiveness parameters αi > 0 and the decisiveness parameter r > 0.

Results
Conclusion

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