Contests with Size Effects

31 Pages Posted: 13 Dec 2004

See all articles by Wolfgang Eggert

Wolfgang Eggert

University of Freiburg - Institute of Public Finance; CESifo (Center for Economic Studies and Ifo Institute)

Martin Kolmar

University of St. Gallen - Institute of Economy and the Environment (IWOe-HSG); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 2004

Abstract

In this paper we analyze the structure of contest equilibria with a variable number of individuals. First we analyze a situation where the total prize depends on the number of agents and where every single agent faces opportunity costs of investing in the contest. Second we analyze a situation where the agents face a trade-off between productive and appropriative investments. Here, the number of agents may also influence the productivity of productive investments. It turns out that both types of contests may lead to opposing results concerning the optimal number of individuals depending on the strength of size effects. Whereas in the former case individual utility is u-shaped when the number of agents increases, the opposite holds true for the latter case. We discuss the implications of our findings for the case of anarchic societies and competition on markets.

Keywords: size effects, contests, anarchy, competition

JEL Classification: D74, L10

Suggested Citation

Eggert, Wolfgang and Kolmar, Martin, Contests with Size Effects (December 2004). Available at SSRN: https://ssrn.com/abstract=634213 or http://dx.doi.org/10.2139/ssrn.634213

Wolfgang Eggert (Contact Author)

University of Freiburg - Institute of Public Finance ( email )

D-79098 Freiburg
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Martin Kolmar

University of St. Gallen - Institute of Economy and the Environment (IWOe-HSG) ( email )

Varnbüelstrasse 14
CH-9000 St. Gallen
Switzerland
+41 (0)71 224 25 35 (Phone)
+41 (0)71 224 23 02 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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