Contests with general preferences

Alexander Dickson, Ian MacKenzie, Petros Sekeris

Research output: Working paper

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Abstract

This article investigates contests when heterogeneous players compete to obtain a share of a prize. We prove the existence and uniqueness of the Nash equilibrium when players have general preference structures. Our results show that many of the standard conclusions obtained in the analysis of contests - such as aggregate effort increasing in the size of the prize and the dissipation ratio invariant to the size of the prize — may no longer hold under a general preference setting. We derive the key conditions on preferences, which involve the rate of change of the marginal rate of substitution between a player’s share of the prize and their effort within the contest, under which these counter-intuitive results may hold. Our approach is able to nest conventional contest analysis — the study of (quasi-)linear preferences — as well as allowing for a much broader class of utility functions, which include both separable and non-separable utility structures.
Original languageEnglish
Place of PublicationGlasgow
Number of pages19
Volume16-08
Publication statusPublished - 13 Jun 2016

Keywords

  • contest
  • general preferences
  • aggregative game

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    Dickson, A., MacKenzie, I., & Sekeris, P. (2016). Contests with general preferences.