Discussion paper // Center for Mathematical Studies in Economics and Management Science 1410
In models of non-deterministic contest, players exert irreversible effort in order to increase their probability of winning a prize. The most prominent functional form of the win probability in the literature is the so-called logit contest success function. We provide a simple micro-foundation of this function for the two contestant case. In this setting the contest administrator is a rational decision maker whose optimal choice is deterministic. However, from the point of view of the contestants the outcome of the contest is probabilistic because of an underlying uncertainty about the type of the administrator.
Contests contest success function effort levels endogenous contest