Contests with general preferences

Alex Dickson (), Ian MacKenzie and Petros Sekeris

No 1608, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: This article investigates contests when heterogeneous players compete to obtain a share of a prize. We prove the existence and uniqueness of the Nash equilibrium when players have general preference structures. Our results show that many of the standard conclusions obtained in the analysis of contests - such as aggregate effort increasing in the size of the prize and the dissipation ratio invariant to the size of the prize - may no longer hold under a general preference setting. We derive the key conditions on preferences, which involve the rate of change of the marginal rate of substitution between a player's share of the prize and their effort within the contest, under which these counter-intuitive results may hold. Our approach is able to nest conventional contest analysis - the study of (quasi-)linear preferences - as well as allowing for a much broader class of utility functions, which include both separable and non-separable utility structures.

Keywords: contest; general preferences; aggregative game (search for similar items in EconPapers)
JEL-codes: C72 D72 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-06
New Economics Papers: this item is included in nep-gth, nep-mic and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:1608

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