Asymmetric contests with liquidity constraints

Grossmann, Martin; Dietl, Helmut

doi:10.1007/s11127-010-9724-4

Cited by 14 publications

(4 citation statements)

References 27 publications

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“…(2002) study contests with privately informed agents, and they find that when the designer aims at maximizing the average bid, it is not optimal to set a cap if bidders have linear or concave cost functions, but it can be with convex cost functions. Our paper is close to Grossman and Dietl (2012) who study the interactions of valuation asymmetries and budget asymmetries in a static Tullock contest with two bidders competing for an exogenous prize. They show that if at least one bidder has a budget constraint, total expenditures are lower than in the absence of constraints.…”

Section: Literature Reviewsupporting

confidence: 61%

The Role of Budget Constraints in Sequential Elimination Tournaments*

Arve

Chiappinelli

2021

Scandinavian J Economics

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Motivated by the EU concept of Pre-Commercial Procurement and the massive presence of SMEs in the European economy, we study how budget constraints affect R&D effort in sequential elimination tournaments. We show that introducing budget constraints leads to a non-monotonicity in unconstrained contestants' effort.Furthermore, we show that if the budget asymmetry is not too large, unconstrained contestants exert higher effort than when faced with unconstrained contestants only.

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Section: Literature Reviewsupporting

confidence: 61%

The Role of Budget Constraints in Sequential Elimination Tournaments*

Arve

Chiappinelli

2021

Scandinavian J Economics

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“…Some examples in the introduction suggest that fixed costs are not necessarily incurred when contestants enter an additional contest. For instance, additional fixed costs do not arise if a consulting firm submits an additional proposal.22 For contests with strict liquidity or budget constraints, see, for example, Gale (1996, 1997) andGrossmann and Dietl (2012).…”

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confidence: 99%

Entry regulations and optimal prize allocation in parallel contests

Grossmann

2021

Rev Econ Design

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In parallel contests, the contest organizer controls the entry of heterogeneous contestants by regulating access to the contests and determining the prize allocation across contests. The organizer can prevent a contestant from entering more than one contest. I show that the organizer allows entry to multiple contests and uniquely sets identical prizes across contests to maximize aggregate effort in all contests. Independent of the entry regulation, I find no sorting effects. Thus, a contest with a relatively high prize does not necessarily attract contestants with higher abilities. Furthermore, I discover interesting spillover effects of prizes between contests in the case of restricted entry regulations. For instance, the individual (aggregate) effort increases (decreases) in a contest if the prize in another contest increases. The endogeneity of contestants’ participation drives many of these results.

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“…Contests can be observed in all fields of social life. Litigation (Wärneryd, 2000;Baye et al, 2005), rent-seeking (Farmer and Pecorino, 1999;Baye and Hoppe, 2003;Grossmann and Dietl, 2011), sport championships (Szymanski, 2003;Dietl et al 2009), political campaigns (Glazer and Gradstein, 2005;Klumpp and Polborn, 2006), military conflicts (Garfinkel and Skaperdas, 2007), and many other forms of competition take the form of contests.…”

Section: Introductionmentioning

confidence: 99%

Transitional Dynamics in a Tullock Contest with a General Cost Function

2010

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This paper constructs and analyzes open-loop equilibria in an infinitely repeated Tullock contest in which two contestants contribute efforts to accumulate individual asset stocks over time.To investigate the transitional dynamics of the contest in the case of a general cost function, we linearize the model around the steady state. Our analysis shows that optimal asset stocks and their speed of convergence to the steady state crucially depend on the elasticity of marginal effort costs, the discount factor and the depreciation rate. In the case of a cost function with a constant elasticity of marginal costs, a lower discount factor, a higher depreciation rate and a lower elasticity imply a higher speed of convergence to the steady state. We further analyze the effects of second prizes in the contest. A higher prize spread increases individual and aggregate asset stocks, but does not alter the balance of the contest in the long run. During the transition, a higher prize spread increases asset stocks, produces a more balanced contest in each period and increases the speed of convergence to the steady state.

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Asymmetric contests with liquidity constraints

Abstract: Asymmetric contests, Competitive balance, Liquidity constraints, Low-valuation bidder, High-valuation bidder, D43, D72, C72,

Cited by 14 publications

References 27 publications

The Role of Budget Constraints in Sequential Elimination Tournaments*

The Role of Budget Constraints in Sequential Elimination Tournaments*

Entry regulations and optimal prize allocation in parallel contests

Transitional Dynamics in a Tullock Contest with a General Cost Function

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