Group Contests with CES-Impact Functions

*Martin Kolmar
Department of Economics, University of St. Gallen

Hendrik Rommeswinkel
Department of Economics, University of St. Gallen

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     Last modified: December 12, 2010
     Presentation date: 03/13/2011 12:00 PM in NH 1130, Session B
     (View Schedule)

Abstract
Usually, groups increase their productivity by the specialization of their group members. In these cases, group output is no longer simply a sum of individual outputs, which may have an effect on the incentives to voluntarily contribute to the group’s output. We analyze this situation in a contest environment with a finite number of groups with a finite number of members and group-specific public goods that allow for different degrees of complementarity between group members’ efforts. More specifically, we use a Tullock contest-success function and a CES-impact function. We show that in equilibrium the degree of complementarity is irrelevant if group members are equally efficient and have an identical valuation of the public good. If group members are heterogenous, higher complementarity of a group also leads to higher similarity in group members’ efforts. However, this will decrease the winning probability of the group.