Centralized versus decentralized contests with risk-averse players

Xiruo Wang, Zenan Wu and Yuxuan Zhu

Economics Letters, 2020, vol. 186, issue C

Abstract: We compare the total effort of centralized single-prize contests and decentralized single-prize contests, assuming risk-averse contestants. Decentralized contests outperform centralized contests when contestants are prudent and sufficiently risk averse. However, decentralized contests are never optimal if the designer can arrange centralized multi-prize contests. Contestants’ welfare is also discussed.

Keywords: Risk aversion; Tullock contests; Centralization; Decentralization; Multiple prizes (search for similar items in EconPapers)
JEL-codes: C72 D72 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519304136

DOI: 10.1016/j.econlet.2019.108816

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