Contests with Alternative Public‐Good Prizes

• DOI: http://doi.org/10.1111/jpet.12196
• Author: KYUNG HWAN BAIK
• Published date: 01 August 2016
• Date: 01 August 2016

CONTESTS WITH ALTERNATIVE PUBLIC-GOOD PRIZES

KYUNG HWAN BAIK

Sungkyunkwan University

Abstract

I study contests in which a society of players compete, by expend-

ing irreversible effort, over which one of alternative prizes should be

awarded to them by the decision maker. The prizes are public goods

and/or public bads for the players. The players choose their effort

levels simultaneously and independently. I define each player’s valua-

tion spread as the difference between his valuations for the two public-

good/public-bad prizes. I establish that the players’ equilibrium effort

levels depend solely on their valuation spreads, and that the players

never expend positive effort for both prizes in equilibrium. Further, I

establish that in equilibrium only players with the widest positive val-

uation spread and players with the widest negative valuation spread

expend positive effort. Finally, I establish that the equilibrium effort

level expended for each prize and the equilibrium total effort level are

determined only by the widest positive valuation spread and the widest

negative valuation spread.

1. Introduction

Consider a situation in which there are two candidates who compete to be the president

of a country and rent seekers make contributions to the candidates’ election campaign.

The contributions are nonrefundable and are used to finance the candidates’ election

campaigns. The winning candidate is selected according to a rule that is based on the

voluntary contributions the rent seekers make. The rent seekers all are affected by the

election result. Some of them get benefits from the elected president—they are granted

government budgets, favors, monopoly rights, and so on. Some of them get damage

from the elected president. This means that each of the presidential candidates can be

considered as a public-good or public-bad prize for each rent seeker.

Kyung Hwan Baik, Department of Economics, Sungkyunkwan University, Seoul 03063, South Korea

(e-mail: khbaik@skku.edu).

I am grateful to Chris Baik, Amy Lee, Cheng-Chen Yang, and two anonymous referees for their

helpful comments and suggestions. Part of this research was conducted while I was Visiting Professor at

the University of Illinois at Urbana-Champaign. This paper was supported by Sungkyun Research Fund,

Sungkyunkwan University, 2014.

Received June 14, 2014; Accepted March 21, 2015.

C2016 Wiley Periodicals, Inc.

Journal of Public Economic Theory, 18 (4), 2016, pp. 545–559.

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