Matros, Alexander and Rietzke, David Michael (2017) Contests on Networks. Working Paper. Lancaster University, Department of Economics, Lancaster.
Abstract
We develop a model of contests on networks. Each player is "connected" to a set of contests, and exerts a single effort to increase the probability of winning each contest to which she is connected. We characterize equilibria under both the Tullock and all-pay auction contest success functions (CSFs), and show that many well-known results from the contest literature can be obtained by varying the structure of the network. We also obtain a new exclusion result: We show that, under both CSFs, equilibrium total effort may be higher when one player is excluded from the network. This finding contrasts the existing literature, which limits findings of this sort to the all-pay auction CSF. Our framework has a broad range of applications, including research and development, advertising, and research funding.