Hybrid All-Pay and Winner-Pay Contests
31 Pages Posted: 27 Sep 2017
Date Written: August 30, 2017
In many contests in economic and political life, both all-pay and winner-pay expenditures matter for winning. This paper studies such hybrid contests under symmetry and asymmetry. The symmetric model is very general but still yields a simple closed-form solution. More contestants tend to lead to substitution toward winner-pay investments, and total expenditures are always lower than in the corresponding all-pay contest. With a biased decision process and two contestants, the favored contestant wins with a higher likelihood, chooses less winner-pay investments, and contributes more to total expenditures. An endogenous bias that maximizes total expenditures disfavors the high-valuation contestant but still makes her the more likely one to win.
Keywords: rent-seeking, lobbying, influence activities, multiple influence channels, producer theory
JEL Classification: C72, D24, D72, D74
Suggested Citation: Suggested Citation