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 )
Summary
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.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
