Sabotage and Free Riding in Contests with a Group-Specific Public-Good/Bad Prize

TL;DR

This paper analyzes contests where groups compete for public-good or bad prizes, considering sabotage efforts and identifying equilibrium strategies based on players' valuations and sabotage activities.

Contribution

It introduces a model with sabotage in group contests and characterizes two types of pure-strategy Nash equilibria depending on parameters.

Findings

Two equilibrium types: one without sabotage, one with sabotage

High-valuation players exert effort in the no-sabotage equilibrium

Low-valuation players exert effort in the sabotage equilibrium

Abstract

We study contests in which two groups compete to win (or not to win) a group-specific public-good/bad prize. Each player in the groups can exert two types of effort: one to help her own group win the prize, and one to sabotage her own group's chances of winning it. The players in the groups choose their effort levels simultaneously and independently. We introduce a specific form of contest success function that determines each group's probability of winning the prize, taking into account players' sabotage activities. We show that two types of purestrategy Nash equilibrium occur, depending on parameter values: one without sabotage activities and one with sabotage activities. In the first type, only the highest-valuation player in each group expends positive effort, whereas, in the second type, only the lowest-valuation player in each group expends positive effort.