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Marginal Subsidies in Tullock Contests
Author(s) -
THOMAS JONATHAN P.,
WANG ZHEWEI
Publication year - 2017
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12203
Subject(s) - contest , subsidy , lottery , economics , microeconomics , marginal cost , resource (disambiguation) , marginal utility , mathematical economics , computer science , market economy , computer network , political science , law
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 sufficiently 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.