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Economic Theory

, Volume 52, Issue 1, pp 271–297 | Cite as

Endogenous contest success functions: a mechanism design approach

  • Leonid PolishchukEmail author
  • Alexander Tonis
Research Article

Abstract

We describe optimal contest success functions (CSF) which maximize expected revenues of an administrator who allocates under informational asymmetry a source of rent among competing bidders. It is shown that in the case of independent private values rent administrator’s optimal mechanism can always be implemented via some CSFs as posited by Tullock. Optimal endogenous CSFs have properties which are often assumed a priori as plausible features of rent-seeking contests; the paper therefore validates such assumptions for a broad class of contests. Various extensions or optimal CSFs are analyzed.

Keywords

Rent seeking Contest success functions Asymmetric information Bayesian mechanism design 

JEL Classification

D72 D82 C73 

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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.State University–Higher School of EconomicsMoscowRussia
  2. 2.New Economic SchoolMoscowRussia

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