Payoff Shares in Two-Player Contests

University of Basel, Faculty of Business and Economics, WWZ Discussion Paper 2014/11

10 Pages Posted: 22 Sep 2015

See all articles by Samuel Häfner

Samuel Häfner

University of St. Gallen

Georg Nöldeke

University of Basel; University of Basel

Date Written: December 15, 2014

Abstract

In contest models with symmetric valuations, equilibrium payoffs are positive shares of the value of the prize. In contrast to a bargaining situation, these shares sum to less than one because a share of the value is lost due to rent-dissipation. We ask: can every such division into payoff shares arise as the outcome of the unique pure-strategy Nash equilibrium of a simple asymmetric contest in which contestants differ in the effectiveness of their efforts? For two-player contests the answer is shown to be positive.

Keywords: Contests, Pure-Strategy Equilibrium, Rent-Dissipation

JEL Classification: C72, D72, D74

Suggested Citation

Häfner, Samuel and Nöldeke, Georg, Payoff Shares in Two-Player Contests (December 15, 2014). University of Basel, Faculty of Business and Economics, WWZ Discussion Paper 2014/11. Available at SSRN: https://ssrn.com/abstract=2663296 or http://dx.doi.org/10.2139/ssrn.2663296

Samuel Häfner (Contact Author)

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

Georg Nöldeke

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://sites.google.com/site/georgnoldeke/

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

HOME PAGE: http://sites.google.com/site/georgnoldeke/

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