The Lifeboat Problem

22 Pages Posted: 17 Oct 2011 Last revised: 31 Oct 2011

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Dan Kovenock

Chapman University - Economic Science Institute; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2011

Abstract

We study an all-pay contest with multiple identical prizes ("lifeboat seats"). Prizes are partitioned into subsets of prizes ("lifeboats"). Players play a twostage game. First, each player chooses an element of the partition ("a lifeboat"). Then each player competes for a prize in the subset chosen ("a seat"). We characterize and compare the subgame perfect equilibria in which all players employ pure strategies or all players play identical mixed strategies in the first stage. We find that the partitioning of prizes allows for coordination failure among players when they play nondegenerate mixed strategies and this can shelter rents and reduce rent dissipation compared to some of the less efficient pure strategy equilibria.

Keywords: all-pay contest, multiple prizes, rent dissipation, lifeboat

JEL Classification: D72, D74

Suggested Citation

Konrad, Kai A. and Kovenock, Daniel, The Lifeboat Problem (September 2011). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2011-13, Available at SSRN: https://ssrn.com/abstract=1945188 or http://dx.doi.org/10.2139/ssrn.1945188

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

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Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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IZA Institute of Labor Economics

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Daniel Kovenock

Chapman University - Economic Science Institute ( email )

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United States

CESifo (Center for Economic Studies and Ifo Institute)

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Germany

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