Rent dissipation and efficiency in a contest with asymmetric valuations

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Abstract

This paper introduces contest efficiency as an alternative to rent dissipation when measuring efficiency in a contest with asymmetric valuations. Contest efficiency is defined as the expected proportion of the maximum obtainable benefit captured by the contest, and differs from rent dissipation because it values the expected winner of the contest. Therefore, rent dissipation and contest efficiency may suggest contradictory conclusions when agents have asymmetric valuations. This result is illustrated when comparing alternative equilibria in contests with asymmetric reimbursement and when analyzing the comparative static effect of a change in the relative benefit of two agents in a Cournot-Nash contest.

Original languageEnglish (US)
Pages (from-to)289-298
Number of pages10
JournalPublic Choice
Volume94
Issue number3-4
DOIs
StatePublished - Jan 1 1998

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