Simple Equilibria in General Contests

Bastani, Spencer and Giebe, Thomas and Gürtler, Oliver (2019): Simple Equilibria in General Contests.

Abstract

We show how symmetric equilibria emerge in general two-player contests in which skill and effort are combined to produce output according to a general production technology and players have skills drawn from different distributions. We also show how contests with heterogeneous production technologies, cost functions and prizes can be analyzed in a surprisingly simple manner using a transformed contest that has a symmetric equilibrium. Our paper provides intuition regarding how the contest components interact to determine the incentive to exert effort, sheds new light on classic comparative statics results, and discusses the implications for the optimal composition of teams.

• Item Type: MPRA Paper
• Language: English
• Keywords: contest theory, symmetric equilibrium, heterogeneity, risk, decision theory
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M51 - Firm Employment Decisions ; Promotions

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