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Asymmetric Endogenous Prize Contests

Damianov, D.S.; Sanders, S.; Yildizparlak, A.

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Authors

S. Sanders



Abstract

We consider a two-player contest in which one contestant has a headstart advantage, but both can exert further effort. We allow the prize to depend on total performance in the contest and consider the respective cases in which efforts are productive and destructive of prize value. When the contest success function takes a logit form, and marginal cost is increasing in effort, we show that a Nash equilibrium exists and is unique both in productive and destructive endogenous prize contests. In equilibrium, the underdog expends more resources to win the prize, but still his probability of winning remains below that of the favorite. In a productive contest, the underdog behaves more aggressively and wins the prize more often in comparison to a fixed-value contest. Thus, the degree of competitive balance—defined as the level of uncertainty of the outcome—depends upon the (fixed or endogenous) prize nature of the contest.

Citation

Damianov, D., Sanders, S., & Yildizparlak, A. (2018). Asymmetric Endogenous Prize Contests. Theory and Decision, 85(3-4), 435-453. https://doi.org/10.1007/s11238-018-9661-0

Journal Article Type Article
Acceptance Date Mar 13, 2018
Online Publication Date Mar 26, 2018
Publication Date Oct 1, 2018
Deposit Date Mar 15, 2018
Publicly Available Date Mar 28, 2024
Journal Theory and Decision
Print ISSN 0040-5833
Electronic ISSN 1573-7187
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 85
Issue 3-4
Pages 435-453
DOI https://doi.org/10.1007/s11238-018-9661-0
Public URL https://durham-repository.worktribe.com/output/1365019

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