Simple Equilibria in General Contests

56 Pages Posted: 19 Dec 2019 Last revised: 17 May 2021

See all articles by Spencer Bastani

Spencer Bastani

IFAU - Institute for Labour Market Policy Evaluation; Linnaeus University - Department of Economics and Statistics; Research Institute of Industrial Economics (IFN)

Thomas Giebe

Linnaeus University - Department of Economics and Statistics

Oliver Gürtler

University of Cologne

Multiple version iconThere are 2 versions of this paper

Date Written: May 17, 2021

Abstract

We show how symmetric equilibria emerge in general two-player contests in which skill and effort are combined to produce output according to a general production technology and players have skills drawn from different distributions. We also show how contests with heterogeneous production technologies, cost functions and prizes can be analyzed in a surprisingly simple manner using a transformed contest that has a symmetric equilibrium. Our paper provides intuition regarding how the contest components interact to determine the incentive to exert effort, sheds new light on classic comparative statics results, and discusses the implications for the optimal composition of teams.

Keywords: contest theory, symmetric equilibrium, heterogeneity, risk, decision theory

JEL Classification: C72, D74, D81, J23, M51

Suggested Citation

Bastani, Spencer and Giebe, Thomas and Gürtler, Oliver, Simple Equilibria in General Contests (May 17, 2021). Available at SSRN: https://ssrn.com/abstract=3496773 or http://dx.doi.org/10.2139/ssrn.3496773

Spencer Bastani

IFAU - Institute for Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden

Linnaeus University - Department of Economics and Statistics ( email )

Växjö, 351 06
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Thomas Giebe (Contact Author)

Linnaeus University - Department of Economics and Statistics ( email )

Växjö, 351 06
Sweden

Oliver Gürtler

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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