From Monopoly to Competition: When do Optimal Contests �Prevail?

Xiaotie Deng¹, Yotam Gafni², Ron Lavi^2,3, Tao Lin⁴ & Hongyi Ling⁵

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^{1 Peking University, 2 Technion, 3 University of Bath, 4 Harvard University, 5 ETH Zurich}

A Single Contest

Competition among Contests

We identify important properties of contests…

Main Result

• MRD+MDU contests form a contestant-symmetric SPE
• If all available contests for the designers are MDU, it is dominant to choose MRD, and the equilibrium is unique
• The MRD+MDU equilibrium is Pareto Optimal for contestants and designers

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BUT

• All the above holds for a stylized full information model with a symmetric cost of effort.
• It somewhat extends, to a stochastic model with two contestants with high/low cost of effort (each w.p. ½).
• Other than that, we show that removing each assumption we make results in a counter-example to our main result.

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