Contest efforts in light of behavioural considerations

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.