RENT DISSIPATION AND EFFICIENCY IN A CONTEST WITH ASYMMETRIC VALUATIONS

This paper introduces contest efficiency as an alternative to rent dis sipation when measuring efficiency in a contest with asymmetric valuat ions. Contest efficiency is defined as the expected proportion of the maximum obtainable benefit captured by the contest, and differs from r ent dissipation because it values the expected winner of the contest. Therefore, rent dissipation and contest efficiency may suggest contrad ictory conclusions when agents have asymmetric valuations. This result is illustrated when comparing alternative equilibria in contests with asymmetric reimbursement and when analyzing the comparative static ef fect of a change in the relative benefit of two agents in a Cournot-Na sh contest.