Hybrid All-Pay and Winner-Pay Contests
Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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Hybrid All-Pay and Winner-Pay Contests. / Lagerlöf, Johan N. M.
I: American Economic Journal: Microeconomics, Bind 12, Nr. 4, 11.2020, s. 144-169.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Hybrid All-Pay and Winner-Pay Contests
AU - Lagerlöf, Johan N. M.
PY - 2020/11
Y1 - 2020/11
N2 - In many contests in economic and political life, both all-pay and winner-pay expenditures matter for winning. This paper studies such hybrid contests under symmetry and asymmetry. The symmetric model assumes very little structure but yields a simple closed-form solution. More contestants tend to lead to substitution toward winner-pay investments, and total expenditures are always lower than in the corresponding all-pay contest. With a biased decision process and two contestants, the favored contestant wins with a higher likelihood, chooses less winner-pay investments, and contributes more to total expenditures. An endogenous bias that maximizes total expenditures disfavors the high-valuation contestant but still makes her the more likely one to win.
AB - In many contests in economic and political life, both all-pay and winner-pay expenditures matter for winning. This paper studies such hybrid contests under symmetry and asymmetry. The symmetric model assumes very little structure but yields a simple closed-form solution. More contestants tend to lead to substitution toward winner-pay investments, and total expenditures are always lower than in the corresponding all-pay contest. With a biased decision process and two contestants, the favored contestant wins with a higher likelihood, chooses less winner-pay investments, and contributes more to total expenditures. An endogenous bias that maximizes total expenditures disfavors the high-valuation contestant but still makes her the more likely one to win.
KW - RENT-SEEKING
KW - DESIGN
KW - SABOTAGE
U2 - 10.1257/mic.20180107
DO - 10.1257/mic.20180107
M3 - Journal article
VL - 12
SP - 144
EP - 169
JO - American Economic Journal: Microeconomics
JF - American Economic Journal: Microeconomics
SN - 1945-7669
IS - 4
ER -
ID: 254995848