Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316345 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. 466
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
Understanding disparities in contest success is central to explaining how competition shapes the distribution of rewards, influence, or market shares. We introduce the Proportional Play Equilibrium (PPE), a boundedly rational alternative to Nash Equilibrium (NE) grounded in the Illusion of Proportionality, and show that it results in more unequal outcomes by exaggerating the success chances of stronger contestants. Laboratory evidence strongly supports PPE's predictions for success dispersion while rejecting those of NE. Our results highlight how equilibrium analysis under full rationality may mischaracterize the inequality-generating effects of competition, with further implications for understanding inequality in markets or political contests.
Subjects: 
Illusion of Proportionality
Bounded Rationality
Contest Success
Market Share and Inequality
Behavioral Contest Theory
JEL: 
D01
D91
D72
C72
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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