A General Framework for Studying Contests

34 Pages Posted: 20 Dec 2019

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: 2019

Abstract

We develop a general framework to study contests, containing the well-known models of Tullock (1980) and Lazear & Rosen (1981) as special cases. The contest outcome depends on players' effort and skill, the latter being subject to symmetric uncertainty. The model is tractable, because a symmetric equilibrium exists under general assumptions regarding production technologies and skill distributions. We construct a link between our contest model and expected utility theory and exploit this link to revisit important comparative statics results of contest theory and show how these can be overturned. Finally, we apply our results to study optimal workforce composition.

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

JEL Classification: C720, D740, D810, J230, M510

Suggested Citation

Bastani, Spencer and Giebe, Thomas and Gürtler, Oliver, A General Framework for Studying Contests (2019). CESifo Working Paper No. 7993, Available at SSRN: https://ssrn.com/abstract=3507264

Spencer Bastani (Contact Author)

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

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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