Competitive outcomes in a Cournot-Tullock contest

Abstract

I endogenise the value of the prize in an $N$-player Tullock contest as the total market revenue obtained in Cournot competition under linear inverse demand. The contest designer, by choosing the parameter relating players’ outputs to their share of market revenue, can maximise total surplus by implementing the perfectly competitive outcome. In contrast, the parameter that maximises players’ payoffs leads them to produce one-half of the perfectly competitive output, which is equivalent to $1/N$ of the monopoly output.