Comparative Statics in Two-Player Contests

Abstract

We analyze two-player contests in which each player exerts effort to influence his probability of winning the prize. Using minimal assumptions on the contest success function, we determine the dependence of equilibrium efforts, success probabilities, and expected payoffs on players' values for the prize. Although some of these results are ambiguous, the ambiguity is resolved if we further assume that the contest success function is homogeneous of degree zero. These findings extend previous results based on more restricted forms of the contest success functions.

Keywords: Two-player contest, contest success function, homogeneity

JEL Classification: D72