Contest Efforts in Light of Behavioural Considerations

Authors: Baharad, Eyal¹; Nitzan, Shmuel²

Source: The Economic Journal, Volume 118, Number 533, November 2008 , pp. 2047-2059(13)

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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.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1468-0297.2008.02201.x

Affiliations: 1: University of Haifa 2: Bar Ilan University

Publication date: 2008-11-01