Chapter 3: The theory of contests: a unified model and review of the literature
Contests are a pervasive fact of life, both in the human and the non-human spheres. Frank Knight (1935, p. 301) saw games of contest as an essential feature of economic life: ‘The activity which we call economic, whether of production or of consumption or of the two together, is also, if we look below the surface, to be interpreted largely by the motives of the competitive contest or game, rather than those of mechanical utility functions to be maximized.’ In a similar fashion, Veblen (1924) emphasized the pervasiveness of emulation, which he defined as ‘the stimulus of an invidious comparison which prompts us to outdo those with whom we are in the habit of classing ourselves’. He believed that ‘with the exception of the instinct for self-preservation, the propensity for emulation is probably the strongest and most alert and persistent of economic motives proper’. Emulation can lead to direct contests, and to wasteful use of resources.
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