Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278787 
Year of Publication: 
2023
Series/Report no.: 
Working Paper No. 361
Version Description: 
Revised version, October 2023
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
While the game-theoretic analysis of conflict is often based on the assumption of multiplicative noise, additive noise such as considered by Hirshleifer (1989) may be equally plausible depending on the application. In this paper, we examine the equilibrium set of the n-player difference-form contest with heterogeneous valuations. For high and intermediate levels of noise, the equilibrium is in pure strategies, with at most one player being active. For small levels of noise, however, we find a variety of equilibria in which some but not necessarily all players randomize. In the case of homogeneous valuations, we obtain a partial uniqueness result for symmetric equilibria. As the contest becomes increasingly decisive, at least two contestants bid up to the valuation of the second-ranked contestant, while any others ultimately drop out. Thus, in the limit, equilibria of the Hirshleifer contest share important properties of equilibria of the corresponding all-pay auction.
Subjects: 
Difference-form contests
Nash equilibrium
rent dissipation
all-pay auction
JEL: 
C72
D72
D74
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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