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Endogenous contest success functions: a mechanism design approach

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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.

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Authors and Affiliations

  1. State University–Higher School of Economics, 20 Myasnitskaya St., 101000, Moscow, Russia

    Leonid Polishchuk

  2. New Economic School, Suite 1721, Nakhimovskii Prospekt 47, 117418, Moscow, Russia

    Alexander Tonis

Authors
  1. Leonid Polishchuk
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  2. Alexander Tonis
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Correspondence to Leonid Polishchuk.

Additional information

The authors are grateful to Fuad Aleskerov, two anonymous referees of this Journal, and participants of the 10th International Meeting of the Society for Social Choice and Welfare for helpful comments and suggestions. The usual disclaimer applies.

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Polishchuk, L., Tonis, A. Endogenous contest success functions: a mechanism design approach. Econ Theory 52, 271–297 (2013). https://doi.org/10.1007/s00199-011-0622-x

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  • DOI: https://doi.org/10.1007/s00199-011-0622-x

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