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Gaining advantage by winning contests

Author

Listed:
  • Derek J. Clark

    (UiT - The Arctic University of Norway)

  • Tore Nilssen

    (University of Oslo)

  • Jan Yngve Sand

    (UiT - The Arctic University of Norway)

Abstract

We consider a principal who faces many identical competitors, and who can distribute a prize fund over two consecutive contests. The winner of contest one gains an advantage in contest two where his effort is more productive than all rivals. We identify a tipping point for the productivity parameter, below which it is optimal for an effort-maximizing principal to place the whole prize in the second contest. Above this level, a single symmetric contest is preferred. The institution chosen depends inextricably upon the number of competitors and their valuation of future gains and costs. We identify the optimal setting of the productivity parameter, showing that introducing asymmetry can increase total efforts by as much as one quarter compared to a single symmetric contest.

Suggested Citation

  • Derek J. Clark & Tore Nilssen & Jan Yngve Sand, 2020. "Gaining advantage by winning contests," Review of Economic Design, Springer;Society for Economic Design, vol. 24(1), pages 23-38, June.
    • Handle: RePEc:spr:reecde:v:24:y:2020:i:1:d:10.1007_s10058-020-00229-0
    DOI: 10.1007/s10058-020-00229-0
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    References listed on IDEAS

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    Cited by:

    1. Kyung Hwan Baik & Youngseok Park, 2022. "Contests for catch shares," Review of Economic Design, Springer;Society for Economic Design, vol. 26(1), pages 23-42, March.
    2. Derek J. Clark & Tore Nilssen, 2021. "Competitive balance when winning breeds winners," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 56(2), pages 363-384, February.

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    More about this item

    Keywords

    Contest; Win advantage; Effort incentives; Budget division;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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