Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307450 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 2024-08
Publisher: 
Bar-Ilan University, Department of Economics, Ramat-Gan
Abstract: 
Many contests, such as innovation races or litigation, often involve reimbursement of expenses. This study examines optimal reimbursement schemes in two-player Tullock contests, analyzing four reimbursement structures: external and internal mechanisms targeting the contest winner or loser. We assess the implications on participant effort, winning probabilities, and designer payoff, under two key conditions: fairness (preserving initial win chances) and viability (positive efforts from players). We find that while external reimbursement for the loser ensures both fairness and viability, full reimbursement to the winner fails to meet these criteria. Additionally, the findings indicate that optimal reimbursement structures and proportions vary depending on the contest designer's objectives, such as maximizing effort or personal payoff.
Subjects: 
contest
reimbursement scheme
R&D
Tullock
JEL: 
C72
K41
O31
Document Type: 
Working Paper

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