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Optimal Accuracy of Unbiased Tullock Contests with Two Heterogeneous Players

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  • Marco Sahm

Abstract

I characterize the optimal accuracy level r of an unbiased Tullock contest between two players with heterogeneous prize valuations. The designer maximizes the winning probability of the strong player or the winner’s expected valuation by choosing a contest with an all-pay auction equilibrium (r ≥ 2). By contrast, if she aims at maximizing the expected aggregate effort or the winner’s expected effort, she will choose a contest with a pure-strategy equilibrium, and the optimal accuracy level r

Suggested Citation

  • Marco Sahm, 2022. "Optimal Accuracy of Unbiased Tullock Contests with Two Heterogeneous Players," CESifo Working Paper Series 9601, CESifo.
    • Handle: RePEc:ces:ceswps:_9601
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    References listed on IDEAS

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    1. Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2013. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," Economics and Politics, Wiley Blackwell, vol. 25(1), pages 48-60, March.
    2. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    3. Ewerhart, Christian, 2017. "Revenue ranking of optimally biased contests: The case of two players," Economics Letters, Elsevier, vol. 157(C), pages 167-170.
    4. Subhasish M. Chowdhury & Patricia Esteve‐González & Anwesha Mukherjee, 2023. "Heterogeneity, leveling the playing field, and affirmative action in contests," Southern Economic Journal, John Wiley & Sons, vol. 89(3), pages 924-974, January.
    5. Alcalde, José & Dahm, Matthias, 2010. "Rent seeking and rent dissipation: A neutrality result," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 1-7, February.
    6. Nti, Kofi O., 2004. "Maximum efforts in contests with asymmetric valuations," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1059-1066, November.
    7. Wang Zhewei, 2010. "The Optimal Accuracy Level in Asymmetric Contests," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-18, April.
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    Cited by:

    1. Letina, Igor & Liu, Shuo & Netzer, Nick, 2023. "Optimal contest design: Tuning the heat," Journal of Economic Theory, Elsevier, vol. 213(C).
    2. Theofanis Tsoulouhas, 2023. "Advances in the Theory and Applications of Contests and Tournaments: Introduction to the Special Issue," Games, MDPI, vol. 14(2), pages 1-3, March.
    3. Savin, Ivan & Mundt, Philipp, 2022. "Drivers of productivity change in global value chains: Reallocation vs. innovation," Economics Letters, Elsevier, vol. 220(C).
    4. Daske, Thomas & March, Christoph, 2024. "Efficient incentives with social preferences," Theoretical Economics, Econometric Society, vol. 19(3), July.
    5. Schmitt, Sefanie Y. & Bruckner, Dominik, 2022. "Unaware consumers and disclosure of deficiencies," BERG Working Paper Series 178, Bamberg University, Bamberg Economic Research Group.
    6. Bruckner, Dominik & Sahm, Marco, 2023. "Party Politics: A Contest Perspective," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277714, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Tullock contest; heterogeneous valuations; accuracy; discrimination; optimal design; all-pay auction;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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