11. introduction to contests Flashcards
what is the formal definition of a contest?
what is a contest sucess function CSF?
the contest sucess function characterises the probability of obtaining the prize of the contest for each player depending on the efforts spent.
what is the general assumption about the players risk functions?
the players are assumed to be risk neutral generally
what is the payoff function for the risk neutral player?
what are the assumptions about the players in a noisy (tullock) contest?
there are N risk neutral players who compete for a single prize of symetric value X>0 in a winner takes all noisy contest. each player simultaneously bids a_i>=0 to win the prize
what is the format of the CSF in the noisy contest>?
what is r??
r is the decisiveness parameter and measures how sensitive the probability of winning the contest is on efforts put by the players. this can be observed quicklym, as r tends to infinity, the maximum bid wins with certainty
r also determines the net effort of the player as when player bids a, his net effort is equal to a^r. if r = 0 then outcome is random
if r is large, then a marginal increase in effort makes a great impact on the probability of winning
what is the formula for the players expected payoff from the contest?
what is the proposition about the best response function and the value of r?
complete
