Splitting contests
Edwin Leuven
Hessel Oosterbeek
Bas van der Klaauw
September 2010
Abstract
In this paper we investigate how heterogeneous agents choose among contests
with different prizes. We show that if the number of agents is sufficiently small,
multiple equilibria can arise. These include perfect-sorting (high-ability agents
compete for high prize and low-ability agents for low prize), mixed strategies
and reversed sorting. We show that total effort always decreases compared
to a single contest. However, splitting the contest may increase the effort of
low-ability agents.
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Last updated: August 23, 2011.