Abstract
We examine prize allocation in contests in which the number of contenders affects prizes. The government allocates a fixed prize between two groups of contenders. The prize share of each group is determined endogenously through the inter-group share contest. Then, the contenders in each group respectively compete for the prize. Examining prize allocation in such contests, we obtain the following results. The contenders expend more resources when they cooperate than when they contribute non-cooperatively in the inter-group share contest. The size effect through prizes increases the prize share of the larger group. The larger group can even obtain the larger share if the size effect through prizes is sufficiently strong.
Highlights
Contests are a resource-allocating mechanism in which winners are selected by certain rules based on resources expended by contenders.1 A large set of economic, political and social interactions can be modeled as a contest
By examining prize allocation in contests with size effects, we aim to extend our understanding of the stratified contests and design of such contests
The more contenders participate in the contest, the larger pecuniary prize is given to the winner of the contest
Summary
Contests are a resource-allocating mechanism in which winners are selected by certain rules based on resources expended by contenders. A large set of economic, political and social interactions can be modeled as a contest. The number of contenders often affects prizes in contests.. Pride and honor of winners in sporting contests would naturally increase in the number of contenders. The purpose of this note is to examine prize allocation in stratified contests in which prize share of each group is endogenously determined and the number of contenders affects prizes. By examining prize allocation in contests with size effects, we aim to extend our understanding of the stratified contests and design of such contests. The groups expend more in the first-stage share contest in the cooperative regime than in the non-cooperative Nash regime This is because the larger group can mitigate the free-rider problem in the cooperative regime.
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