An approximate solution to rent-seeking contests with private information

•We study rent-seeking contests with private information.•We propose a method to approximate the optimal level of investment in the game.•The method only requires knowledge of the mean of the distribution of valuations.•We compare the approximate and the optimal solutions in a variety of contexts.•T...

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Bibliographic Details
Published inEuropean journal of operational research Vol. 256; no. 2; pp. 673 - 684
Main Author Gallice, Andrea
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 16.01.2017
Elsevier Sequoia S.A
Subjects
Approximate solution
Approximation
Behavioural OR
Parameter optimization
Private information
Rent-seeking contests
Rentals
Studies
Valuation
Behavioural OR
Private information
Approximate solution
Rent-seeking contests
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Summary:•We study rent-seeking contests with private information.•We propose a method to approximate the optimal level of investment in the game.•The method only requires knowledge of the mean of the distribution of valuations.•We compare the approximate and the optimal solutions in a variety of contexts.•The method performs well across a wide range of model specifications. We propose an approximate solution to rent-seeking contests in which participants have heterogeneous and private valuations. The procedure only requires common knowledge about the mean of the distribution of valuations. We obtain a closed-form expression for an agent’s level of investment and subject it to comparative statics analysis. We then assess the performance of the model and find that the proposed solution provides a remarkably effective approximation of the optimal solution for a wide range of parameter specifications.
Bibliography:SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 14
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2016.07.039