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Contests with an unknown number of contestants

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Abstract

This paper studies rent-seeking contests where the contestants do not know the number of actively competing contestants. Two models are compared. In the first, all players are risk neutral; in the second, all have constant absolute risk aversion. If the expected fraction of active contestants is low, an increase in the number of potential contestants increases individual rent-seeking efforts. This effect is in contrast to the complete information case where individual rent-seeking efforts decrease in the number of contestants. The effect is more likely under risk neutrality, but also possible under risk aversion. Equilibrium rent seeking efforts are lower under risk aversion if and only if the expected fraction of active contestants is low.

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Authors and Affiliations

  1. Free University of Berlin and WZB, Reichpietschufer 50, 10785, Berlin, Germany

    Johannes Münster

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  1. Johannes Münster
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Correspondence to Johannes Münster.

Additional information

I want to thank an anonymous referee for suggesting to study risk aversion in the framework of the present paper. Any errors are mine. Financial support from the German Science Foundation through SFB/TR 15 is gratefully acknowledged.

JEL codes: D72, D82

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Münster, J. Contests with an unknown number of contestants. Public Choice 129, 353–368 (2006). https://doi.org/10.1007/s11127-006-9035-y

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  • DOI: https://doi.org/10.1007/s11127-006-9035-y

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