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Effort maximization in asymmetric contest games with heterogeneous contestants

Author

Listed:
  • Jörg Franke
  • Christian Kanzow
  • Wolfgang Leininger
  • Alexandra Schwartz

Abstract

Contest rules are set up by administrators who frequently have discretionary power in specifying the details of these rules, i.e., they can bias the contest rules toward specific contestants in order to further their prime objective. We derive the optimal bias of the contest rule for a contest administrator, who is interested in maximizing the total efforts expended in the contest. The solution is obtained in closed form for a widely used class of n-person contest games. Setting the optimal bias has important implications: (i) there is never exclusion of strong players, instead there is (endogenously induced) inclusion of weak contestants; (ii) the contest administrator will optimally level the playing field by encouraging weak contestants, but he will not equalize the contestants’ chances unless they are identical; and (iii) at least three contestants will be active in equilibrium of the optimal contest, irrespective of heterogeneity. Copyright Springer-Verlag 2013

Suggested Citation

  • Jörg Franke & Christian Kanzow & Wolfgang Leininger & Alexandra Schwartz, 2013. "Effort maximization in asymmetric contest games with heterogeneous contestants," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(2), pages 589-630, March.
    • Handle: RePEc:spr:joecth:v:52:y:2013:i:2:p:589-630
    DOI: 10.1007/s00199-011-0657-z
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    More about this item

    Keywords

    Contest theory; Contest design; Level playing field; C72; D72;
    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

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