A general framework for studying contests

Bastani, Spencer and Giebe, Thomas and Gürtler, Oliver (2019): A general framework for studying contests.

Abstract

We develop a general framework to study contests, containing the well-known models of Tullock (1980) and Lazear and Rosen (1981) as special cases. The contest outcome depends on players' effort and skill, the latter being subject to symmetric uncertainty. The model is tractable, because a symmetric equilibrium exists under general assumptions regarding production technologies and skill distributions. We construct a link between our contest model and expected utility theory and exploit this link to revisit important comparative statics results of contest theory and show how these can be overturned. Finally, we apply our results to study optimal workforce composition.

• 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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