Difference-Form Contests and the Robustness of All-Pay Auctions

In much of the existing literature on rent-seeking games, the outcome of the contest is either infinitely sensitive or relatively insensitive to contestants’ efforts. The current paper presents a family of contest games that permit characterization of equilibrium for all levels of sensitivity of the outcome to contestants’ efforts. Specifically, the outcome of the contest depends on the difference between efforts, which encompass the lottery and the all-pay auction as polar cases. The equilibrium converges to that of the all-pay auction as the probability of winning the prize grows infinitely sensitive to one’s effort, and the main qualitative features of equilibrium persist over a large parameter region. Journal of Economic Literature Classification Numbers: D44, D72. Q 2000 Academic Press