Contest Efforts in Light of Behavioural Considerations

Eyal Baharad and Shmuel Nitzan

Economic Journal, 2008, vol. 118, issue 533, 2047-2059

Abstract: This study shows that distortion of probabilities is a possible reason for rent under‐dissipation in contests with relatively small number of participants. Such distortion may also result, however, in over‐dissipation of the contested rent. Focusing on contests with homogeneous contestants and the commonly studied contest success function, our main results clarify under what circumstances (i) rents are more under‐dissipated relative to the standard situation where probabilities are not distorted (ii) rents are under‐dissipated, yet less intensely relative to the standard situation where probabilities are not distorted (iii) rents are over‐dissipated and (iv) the contest does not possess a symmetric interior equilibrium in pure strategies.

Date: 2008
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https://doi.org/10.1111/j.1468-0297.2008.02201.x

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