Multiple designer's objectives in business contests

Chen Cohen, Roy Darioshi and Shmuel Nitzan

Economics and Politics, 2024, vol. 36, issue 2, 792-808

Abstract: The vast contest literature disregarded the possibility of optimal contest design with simultaneous attainment of various objectives. The main goal of the current article is to illustrate the potential usefulness of a navigation tool that allows the designer to achieve, simultaneously, multiple objectives in contests between companies (competing for resources/patents/market‐share, etc), based on a unit tax and a lump‐sum subsidy. Our proposal is illustrated applying the most common simple setting of two contestants whose winning probabilities are determined by the simple lottery contest success function (CSF). We focus on seven main objectives: reducing the competition's intensity in terms of efforts: increasing profit for the state treasury; promoting equality between the players in terms of gap between the contestants' efforts, winning probabilities and expected payoffs, and budget and expenditure balancing. We also analyze the possible negative external effects of achieving a particular objective. Our main insight is that a complete differential policy can be used to attain, simultaneously (with two exceptions), all the objectives of the designer. In contrast, the use of a uniform policy, subject to a balanced budget objective, cannot ensure complete equality or maximize profit. It nevertheless guarantees a Pareto‐superior outcome relative to the situation before the designer's intervention. Future research may generalize the findings to any type of contest or CSF and multiple contestants.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/ecpo.12270

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecopol:v:36:y:2024:i:2:p:792-808

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0954-1985

Access Statistics for this article

Economics and Politics is currently edited by Peter Rosendorff

More articles in Economics and Politics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().