Contests with General Preferences

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Dickson, Alex and MacKenzie, Ian A. and Sekeris, Petros (2016) Contests with General Preferences. Discussion paper. University of Strathclyde, Glasgow.

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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.

ORCID iDs

Dickson, Alex ORCID logoORCID: https://orcid.org/0000-0001-9386-9036, MacKenzie, Ian A. and Sekeris, Petros;
CORE (COnnecting REpositories)