Marginal subsidies in Tullock contests

Jonathan Thomas, Zhewei Wang

Research output: Contribution to journalArticlepeer-review

Abstract

In a general Tullock contest, we examine a situation where a limited resource can be used to provide marginal subsidies to either player (weak or strong), or to increase the prize directly. We show that to maximize total effort, subsidizing the weak/strong player is preferred when the contest is suffciently accurate/inaccurate. This result generalizes to n-player lottery contests. In a lottery contest (Tullock contest with r = 1), we derive the optimal scheme for a full range of resource: when the resource is small, it is optimal to only subsidize the weak player; when it is large, both players should be subsidized simultaneously.
Original languageEnglish
Pages (from-to)511-526
JournalJournal of Public Economic Theory
Volume19
Issue number2
Early online date11 Aug 2016
DOIs
Publication statusPublished - Apr 2017

Keywords

  • tulloch contest
  • resource
  • marginal subsidy
  • prize

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