| By: |
Thomas Giebe (Department of Economics and Statistics, School of Business and Economics, Linnaeus University, Sweden);
Oliver Gürtler (Department of Economics, University of Cologne, Germany) |
| Abstract: |
In competitive settings, disparities in player strength are common. It is
intuitively unclear whether a stronger player would opt for larger or smaller
effort compared to weaker players. Larger effort could leverage their
strength, while lower effort might be justified by their higher probability of
winning regardless of effort. We analyze contests with three or more players,
exploring when stronger players exert larger or lower effort. To rank efforts,
it suffices to compare marginal utilities in situations where efforts are
equal. Effort ranking depends on differences in hazard rates (which are
smaller for stronger players) and reversed hazard rates (which are larger for
stronger players). Compared to weaker players, stronger players choose larger
effort in winner-takes-all contests and lower effort in loser-gets-nothing
contests. Effort rankings can be non-monotonic in contests with several
identical prizes, and they depend on the slopes of players’ pdfs in contests
with linear prize structure. |
| Keywords: |
contest theory, heterogeneity, player strength |
| JEL: |
C72 D74 D81 |
| Date: |
2024–03 |
| URL: |
http://d.repec.org/n?u=RePEc:ajk:ajkdps:285&r=spo |