Incentive Design in Competitive Resource Allocation: Exploiting Valuation Asymmetry in Tullock Contests
This work provides a tractable framework for incentive design in competitive settings, offering a novel mechanism for coordinators to exploit valuation asymmetry without altering the underlying contest structure.
This paper studies how a central coordinator can gain an advantage in competitive resource allocation by strategically manipulating the valuations reported by subordinate agents in Tullock contests. The authors characterize the Nash equilibrium for general multi-player contests and derive optimal reported valuations that reduce the coordinator's optimization to a two-variable problem, regardless of the number of subordinates.
In competitive resource allocation, a central coordinator may seek to gain an advantage not by directly controlling subordinate agents, but by strategically manipulating the information they receive. We study this problem within the framework of multi-player Tullock contests, where the coordinator influences subordinate players by designing their reported valuations of the contested prize, a mechanism that preserves the Tullock structure of the subordinates' objectives and thereby enables tractable equilibrium analysis. We first characterize the Nash equilibrium of the general multi-player Tullock contest, establishing how valuations and per-unit costs jointly determine equilibrium bids and payoffs. We then derive the optimal reported valuations for a coordinator managing two subordinates against a single opponent, and show that the structure of the optimal solution extends to contests with an arbitrary number of subordinates, reducing the coordinator's optimization to a two-variable problem regardless of system size.