The Equivalence of Contests
ESRC Centre for Competition Policy Working Paper No. 10-5
20 Pages Posted: 14 May 2010
Date Written: December 2009
We use a Tullock-type contest model to show that intuitively and structurally different contests can be strategically and revenue equivalent to each other. We consider a two-player contest, where outcome-contingent payoffs are linear functions of prizes, own effort, and the effort of the rival. We identify strategically equivalent contests that generate the same family of best response functions and, as a result, the same revenue. However, two strategically equivalent contests may yield different equilibrium payoffs. Finally, we discuss possible contest design applications and avenues for future theoretical and empirical research.
Keywords: Rent-seeking, contest, spillover, equivalence, revenue equivalence, contest design
JEL Classification: C72, D72, D74
Suggested Citation: Suggested Citation