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Contest Efforts in Light of Behavioural Considerations
Eyal Baharad and Shmuel Nitzan
The Economic Journal
Vol. 118, No. 533 (Nov., 2008), pp. 2047-2059
Stable URL: http://www.jstor.org/stable/20485288
Page Count: 13
You can always find the topics here!Topics: Economic theory, Economic rent, Contests, Rent seeking behavior, Necessary conditions, Mathematical independent variables, Loss aversion, Nash equilibrium, Political economy, Risk aversion
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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.
The Economic Journal © 2008 Royal Economic Society