Additive Multi-Effort Contests
Peer reviewed, Journal article
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Original versionHausken, K. (2020) Additive Multi-Effort Contests. Theory and Decision, https://doi.org/10.1007/s11238-020-09749-1 10.1007/s11238-020-09749-1
Impact on rent seeking occurs even when a player exerts only one effort. This contrasts with models of multiplicative efforts with impact on rent seeking only when a player exerts all its available efforts. An analytical solution is developed when the contest intensities are below one, and equal to one for one effort. Then, additional efforts causing interior solutions give players higher expected utilities and lower rent dissipation, which contrasts with earlier findings for multiplicative efforts. Players cut back on the effort with contest intensity equal to one, and exert alternative efforts instead. Accounting for solutions which have to be determined numerically, a Nash equilibrium selection method is provided. For illustration, an example with maximum two efforts for each player is provided. Equilibria are shown where both players choose both efforts, or one player withdraws from its most costly effort. Both players may collectively prefer to exclude one of their efforts, though in equilibrium, they may prefer both efforts. When all contest intensities are equal to one or larger than one, only the one most cost-effective effort is exerted, due to the logic of linear or convex production. Rent dissipation increases in the contest intensity, and is maximum when the players are equally advantaged determined by unit effort cost divided by impact.