Working Paper: CEPR ID: DP17611
Authors: Sandro Shelegia; Christopher Wilson
Abstract: Some important forms of contests have participation costs and 'default allocations' where the contest prize is still awarded even when no-one actively competes. We solve a general, all-pay contest model that allows for flexible forms of these features under arbitrary asymmetry. We then use our framework to better connect the literatures on contests and sales price competition, and use this connection to solve some long-standing problems. Finally, we analyze how participation costs and default allocations can be used as novel, practical tools in contest design. Throughout, the combined presence of participation costs and default allocations often reverse otherwise familiar intuitions.
Keywords: Allpay contests; Participation costs; Default allocations; Clearinghouse sales; Contest design
JEL Codes: C72; L13; D43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| participation costs (D23) | competitive behavior (L13) |
| default allocations (D51) | competitive behavior (L13) |
| participation costs + default allocations (G32) | unique equilibria (C62) |
| participation costs + default allocations (G32) | players' strategies (C72) |
| reach (Y60) | players' behavior (active) (Z22) |
| strength (L10) | players' behavior (passive) (Z22) |