Additive multi-effort contests with multiple investment opportunities

ABSTRACT

Two players simultaneously exert multiple additive efforts. Expected utility maximization follows from exerting one effort with the lowest ratio of unit cost divided by impact. This contrasts with the assumption for multiplicative efforts which all have to be exerted. Fifty percent of the rent is dissipated when the players have equal ratios of unit cost divided by impact. Rent dissipation decreases as the players’ ratios become more unequal. Adding efforts with large unit cost divided by impact influences neither strategies nor rent dissipation. In contrast, socially unproductive multiplicative efforts may unbalance contests and increase rent dissipation. Adding efforts with low unit cost divided by impact decreases (increases) rent dissipation if the advantaged player becomes more (less) advantaged.

KEYWORDS:

• Rent seeking
• additive efforts
• contest success function
• rent dissipation

JEL CLASSIFICATION:

• C70
• C72
• D72
• D74

Disclosure statement

No potential conflict of interest was reported by the author.