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Nash Equilibrium: Write down the n-player version of a Tullock con- test model (preferably the general form containing the parameter r) as introduced in

 

Nash Equilibrium: Write down the n-player version of a Tullock con- test model (preferably the general form containing the parameter r) as introduced in the lecture. Solve (determine) the symmetric equilibrium effort of that general model (detailed computation) as a function of the model parameters n, P and the parameters of the cost function (b and a), i.e., determine the optimal effort function e*(n. P. a,b). (Hint: ignore second-order conditions.) Comparative Statics: Using your result e(n, P. a, b), identify and inter- pret how the equilibrium effort would change if the prize P is increased, if the cost function is changed (parameters a and b), if the number of players n is increased. Illustration: Select one of those variables (n, P. a, b) and prepare a plot (illustration in a diagram), where you put this variable on the x-axis and e on the y-axis. This requires that you fix values for all the other parameters. For example, if you make a plot with n on the x-axis and e on the y-axis, then you need to fix values for the other parameters, e.g., a = b = P = 1). Explain your diagram: How does the equilibrium contest effort change when the value of your selected variable changes?

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