Many economists have studied rent-seeking contests, innovation tournaments, and patent-race games independently. These three seemingly different games are known to be strategically equivalent under some reasonable assumptions. In these classic games, it is assumed that the value of a prize, i.e. the gain from rent-seeking, achieving an innovation, or obtaining a patent, is exogenously given and does not depend on the number of players, so that an increase in the number of players decreases the winning rate of each player. However, if players engage in R&D and then set quantities à la Cournot, the value of the prize in general depends on the number of players. In this paper, we set up a model with one efficient player and identical inefficient players to analyze how an increase in heterogeneity among players or the number of players changes the wining rate of the efficient player. One of the main results is that if the number of players is larger than some critical value, which can be less than two, an increase in the number of inefficient players always increases the winning rate of the efficient player.
Marginal Cost Cost Difference Investment Level Investment Incentive Unit Production Cost
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This research was in part supported by JSPS KAKENHI (Grants-in-Aid for Scientific Research) Grant Number 19530151. An earlier version of this paper was presented at PET10 (the 9th annual conference of the association for public economic theory) held in Istanbul, 2010. We would like to thank a referee of this Festschrift and the participants in PET10 and the workshop held at Niigata University for many helpful comments and suggestions. Only the authors are responsible for any remaining errors and omissions.
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