Contest Efforts in Light of Behavioural Considerations

This study shows that distortion of probabilities is a possible reason for rent under-dissipation in contests with relatively small number of participants. Such distortion may also result, however, in over-dissipation of the contested rent. Focusing on contests with homogeneous contestants and the c...

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Veröffentlicht in:The Economic journal (London) 2008-11, Vol.118 (533), p.2047-2059
Hauptverfasser: Baharad, Eyal, Nitzan, Shmuel
Format: Artikel
Sprache:eng
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Zusammenfassung:This study shows that distortion of probabilities is a possible reason for rent under-dissipation in contests with relatively small number of participants. Such distortion may also result, however, in over-dissipation of the contested rent. Focusing on contests with homogeneous contestants and the commonly studied contest success function, our main results clarify under what circumstances (i) rents are more under-dissipated relative to the standard situation where probabilities are not distorted (ii) rents are under-dissipated, yet less intensely relative to the standard situation where probabilities are not distorted (iii) rents are over-dissipated and (iv) the contest does not possess a symmetric interior equilibrium in pure strategies.
ISSN:0013-0133
1468-0297
DOI:10.1111/j.1468-0297.2008.02201.x