The gap between equilibrium expected payoffs in contests with linear externalities

Sung-Hoon Park (s.h.park@daum.net)

Economics Bulletin, 2019, vol. 39, issue 4, 2302-2307

Abstract: Two-player Tullock-type contests with linear externalities are classified into two, those with cost externality and those with rent externality. We consider the players' symmetric externalities and their asymmetric abilities and examine the gap between their equilibrium expected payoffs. We find that (1) in the two types of contests, the expected payoff is larger for the favorite than for the underdog, (2) in the cost-externality contest, the gap between the players' expected payoffs is constant regardless of changes in extent of externalities, and (3) in the contest with rent externality, the gap increases when it becomes more enhanced with externalities.

Keywords: asymmetric abilities; contests; cost and rent externalities; expected payoffs (search for similar items in EconPapers)
JEL-codes: C7 D7 (search for similar items in EconPapers)
Date: 2019-10-13
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Citations: View citations in EconPapers (1)

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