“Reverse” nested lottery contests

Qiang Fu, Jingfeng Lu and Zhewei Wang ()

Journal of Mathematical Economics, 2014, vol. 50, issue C, 128-140

Abstract: This paper proposes a multi-prize “reverse” nested lottery contest model, which can be viewed as the “mirror image” of the conventional nested lottery contest of Clark and Riis (1996a). The reverse-lottery contest model determines winners by selecting losers based on contestants’ one-shot effort through a hypothetical sequence of lotteries. We provide a microfoundation for the reverse-lottery contest from a perspective of (simultaneous) noisy performance ranking and establish that the model is underpinned by a unique performance evaluation rule. We further demonstrate that the noisy-ranking model can be interpreted intuitively as a “worst-shot” contest, in which contestants’ performances are evaluated based on their most severe mistakes. The reverse-lottery contest model thus depicts a great variety of widely observed competitive activities of this nature. A handy closed-form solution for a symmetric equilibrium of the reverse-lottery contest is obtained. We show that the winner-take-all principle continues to hold in reverse-lottery contests. Moreover, we find that a reverse-lottery contest elicits more effort than a conventional lottery contest whenever the prizes available to contestants are relatively scarce.

Keywords: Contest elimination function; Imperfectly discriminatory contests; Least-favorable performance ranking; Multi-prize contest (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: "Reverse" Nested Lottery Contests (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:50:y:2014:i:c:p:128-140

DOI: 10.1016/j.jmateco.2013.08.007

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