Abstract
We consider a symmetric two-player contest, in which the choice set of effort is constrained. We apply a fundamental property of the payoff function to show that, under standard assumptions, there exists a unique Nash equilibrium in pure strategies. It is shown that all equilibria are near the unconstrained equilibrium. Perhaps surprisingly, this is not the case when players have different prize evaluations.
| Original language | English |
|---|---|
| Article number | 109559 |
| Journal | Economics Letters |
| Volume | 196 |
| DOIs | |
| State | Published - Nov 2020 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2020 Elsevier B.V.
Funding
We thank an anonymous referee for valuable comments. In addition, this work has benefited from useful discussions with Nirit Agay, Christian Ewerhart, Arthur Fishman, Aart Gerritsen, Kai Konrad, Dan Kovenock, Ella Segev, Marco Serena, and Huseyin Yildirim. We also thank the audiences at the Public Choice Society meeting, the Contests: Theory and Evidence Conference, the AEA annual meeting, and a seminar held at the Max Planck Institute of Tax Law and Public Finance. All remaining errors are those of the authors. Doron Klunover thanks the Max Planck Institute of Tax Law and Public Finance for its support and hospitality (part of this paper was written during his visit there).
| Funders | Funder number |
|---|---|
| Max Planck Institute of Tax Law and Public Finance | |
| Alaska Energy Authority |
Keywords
- Constrained choice set of effort
- Contests