On overdissipation of rents in contests with endogenous intrinsic motivation
In this paper, we show how endogenously determined intrinsic mo- tivation a¤ects the rents dissipated in a contest. If players just add an intrinsic bene…t to their taking part in the contest, then in the unique Nash equilibrium all players activate their intrinsic motivation. Most important, if the intrinsic value players attach to their taking part in the contest is su¢ ciently high, overdissipation of rents occurs. If, however, players maximize a weighted sum of extrinsic and intrinsic payo¤s, they deactive their intrinsic motivation and overdissipation of rents does not occur.
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