14th journées Louis-André Gérard-Varet

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Strategic Choice of Sharing Rules in Collective Contests
Orestis Troumpounis, Pau Balart, Sabine Flamand

Last modified: 2015-05-11

Abstract


Competition between groups often involves prizes that have both a public and

a private component. The exact nature of the prize not only aects the strategic

choice of the sharing rules determining its allocation but also gives rise to an inter-

esting phenomenon not observed when the prize is either purely public or purely

private. Indeed, we show that in the two-groups contest, for most degrees of pri-

vateness of the prize, the large group uses its sharing rule as a mean to exclude the

small group from the competition, a situation called monopolization. Conversely,

there is a degree of relative privateness above which the small group, besides being

active, even outperforms the large group in terms of winning probabilities, giving

rise to the celebrated group size paradox.