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Institute of Economics

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  7. New BERG Working Paper No. 175 by Marco Sahm published!

New BERG Working Paper No. 175 by Marco Sahm published!

In the BERG Working Paper Series Marco Sahm has published a new paper entitled "Optimal Accuracy of Unbiased Tullock Contests with
Two Heterogeneous Players".

A complete overview of all BERG Working Papers published so far can be found here.

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Abstract 

I characterize the optimal accuracy level r of an unbiased Tullock contest between two players with heterogeneous prize valuations. The designer maximizes the winning probability of the strong player or the winner's expected valuation by choosing a contest with an all-pay auction equilibrium (r ≥ 2). By contrast, if she aims at maximizing the expected aggregate effort or the winner's expected effort, she will choose a contest with a pure-strategy equilibrium, and the optimal accuracy level r < 2 decreases in the players' heterogeneity. Finally, a contest designer who faces a tradeoff between selection quality and minimum (maximum) effort will never (may) chose a contest with a semi-mixed equilibrium.