Matthew W. Thomas
Homepage of Matthew W. Thomas, an Economist
2023-12-30T00:00:00Z
https://www.matthewthom.as/feed.xml
Matthew W. Thomas
How to use GNU Screen
2020-01-16T00:00:00Z
https://www.matthewthom.as/blog/screen/
<h2>Basic usage</h2>
<h3>Single terminal</h3>
<p>To launch screen, just run</p>
<pre><code class="language-sh">screen
</code></pre>
<p>Then run all of your commands like <code>stata -b do filename</code>. When you want to “minimize” the terminal, just press <strong>Ctrl+A</strong> followed by the <strong>D</strong> key.</p>
<p>You can then safely log out of ssh without killing the precess that you ran.</p>
<pre><code class="language-sh">exit
</code></pre>
<p>When <code>ssh</code> back into the server, you can check back on the process by running</p>
<pre><code class="language-sh">screen -r
</code></pre>
<p>This will reopen the terminal that you just closed.</p>
<h3>Using tabs</h3>
<p>You can create a new tab inside of a screen by pressing <strong>Ctrl+A</strong> followed by the <strong>C</strong> key. You will then have a tab 0 and a tab 1.</p>
<p>You can swap between tabs by pressing <strong>Ctrl+A</strong> followed by <strong>Shift+’</strong> (actually <strong>Shift+"</strong>).</p>
<p>You can close a tab by pressing <strong>Ctrl+D</strong> or just running <code>exit</code>.</p>
<h2>Managing multiple screens</h2>
<p>You can create a second screen by running</p>
<pre><code class="language-sh">screen
</code></pre>
<p>you can list all open screens by running</p>
<pre><code class="language-sh">screen -list
</code></pre>
<pre><code class="language-shell_session">There are screens on:
2239.tty.host (Detached)
2044.tty.host (Detached)
22287.tty.host (Detached)
3 Sockets in /var/run/screen/S-user.
</code></pre>
<p>You can specify which screen you want to connect to using the name from the list.</p>
<pre><code class="language-sh">screen -r 2044.tty.host
</code></pre>
<p>The pid (the number part) is also sufficient</p>
<pre><code class="language-sh">screen -r 2044
</code></pre>
<p>You can close a screen using <strong>Ctrl+D</strong></p>
Real Induction
2021-03-08T00:00:00Z
https://www.matthewthom.as/blog/induction-on-reals/
<p>Conventional proof by induction allows you to prove that a statement applies to an infinite sequence. The argument is that if a property holds on the first element, and always holds on the next element, then it must hold on all elements.</p>
<blockquote>
<p>But what do you do when there is no next element?</p>
</blockquote>
<p><a href="https://arxiv.org/abs/1208.0973">Some notes on the arXiv</a> show that there is an analogous version to proof by induction that can apply to uncountable sets like the Real numbers. Conventional induction cannot work on uncountable set because, by definition, you cannot reach all elements by iteratively stepping through them.</p>
<p>In the real induction, we get around this issue by breaking the space into countably many intervals. Formally, let <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>a</mi><mo><</mo><mi>b</mi></mrow><annotation encoding="application/x-tex">a < b</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">a</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal">b</span></span></span></span> be real numbers. We want to show that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>b</mi><mo stretchy="false">]</mo><mo>=</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">[a, b] = S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">b</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span>. That is, we want all elements of the interval to “satisfy” property <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>S</mi></mrow><annotation encoding="application/x-tex">S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span>. We define the subset <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>S</mi><mo>⊆</mo><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>b</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">S \subseteq [a,b]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8193em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">⊆</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">b</span><span class="mclose">]</span></span></span></span> to be <em>inductive</em> if:</p>
<ol>
<li><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>a</mi><mo>∈</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">a \in S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">a</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span>.</li>
<li>If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>a</mi><mo>≤</mo><mi>x</mi><mo><</mo><mi>b</mi></mrow><annotation encoding="application/x-tex">a \leq x < b</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal">a</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal">b</span></span></span></span>, then <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo>∈</mo><mi>S</mi><mtext> </mtext><mo>⟹</mo><mtext> </mtext><mo stretchy="false">[</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">]</mo><mo>⊂</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">x \in S \implies [x,y] \subset S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7073em;vertical-align:-0.024em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">⟹</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">⊂</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> for some <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>y</mi><mo>></mo><mi>x</mi></mrow><annotation encoding="application/x-tex">y > x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span>.</li>
<li>If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>a</mi><mo><</mo><mi>x</mi><mo>≤</mo><mi>b</mi></mrow><annotation encoding="application/x-tex">a < x \leq b</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">a</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal">b</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>x</mi><mo stretchy="false">)</mo><mo>⊂</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">[a,x) \subset S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">⊂</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span>, then <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo>∈</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">x \in S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span>.</li>
</ol>
<p>The result is that a subset <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>S</mi><mo>⊂</mo><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>b</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">S \subset [a,b]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7224em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">⊂</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">b</span><span class="mclose">]</span></span></span></span> is inductive if and only if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>S</mi><mo>=</mo><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>b</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">S = [a,b]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">b</span><span class="mclose">]</span></span></span></span>. So, if conditions 1-3 hold, then property <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>S</mi></mrow><annotation encoding="application/x-tex">S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> is satisfied on <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>b</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">[a,b]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">b</span><span class="mclose">]</span></span></span></span>.</p>
<h2>Intuition and alternative</h2>
<p>Most people do not know what real induction is. However, the logic behind it is very easy to understand. So, applying real induction directly is usually not the clearest way to write a proof. The underlying idea behind real induction can be found in many proofs. However, it is rarely referred to as real induction. Typically, people use a proof by contradiction that goes something like this:</p>
<div class="proof">
<p>Suppose, by way of contradiction, that there exists an element in <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>b</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">[a,b]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">b</span><span class="mclose">]</span></span></span></span> that is not in <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>S</mi></mrow><annotation encoding="application/x-tex">S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span>. Then, there must be a <em>first switching point</em>. That is, there must be a minimal <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi></mrow><annotation encoding="application/x-tex">x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span> such that either <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo mathvariant="normal">∉</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">x \notin S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><span class="mord"><span class="mrel">∈</span></span><span class="mord vbox"><span class="thinbox"><span class="llap"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="inner"><span class="mord"><span class="mord">/</span><span class="mspace" style="margin-right:0.0556em;"></span></span></span><span class="fix"></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> or <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>z</mi><mo stretchy="false">]</mo><mo mathvariant="normal">∉</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">(x,z] \notin S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><span class="mord"><span class="mrel">∈</span></span><span class="mord vbox"><span class="thinbox"><span class="llap"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="inner"><span class="mord"><span class="mord">/</span><span class="mspace" style="margin-right:0.0556em;"></span></span></span><span class="fix"></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> for some <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>z</mi><mo>></mo><mi>x</mi></mrow><annotation encoding="application/x-tex">z > x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span>. Then, we need to prove</p>
<ol>
<li><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo>></mo><mi>a</mi></mrow><annotation encoding="application/x-tex">x > a</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">a</span></span></span></span> (using 1 and 2 from real induction). Therefore, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>x</mi><mo stretchy="false">)</mo><mo>∈</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">[a, x) \in S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> because <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi></mrow><annotation encoding="application/x-tex">x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span> is the first switching point.</li>
<li>If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>x</mi><mo stretchy="false">)</mo><mo>∈</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">[a, x) \in S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> then, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo>∈</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">x \in S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> (using 3 from real induction). Therefore, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>z</mi><mo stretchy="false">]</mo><mo mathvariant="normal">∉</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">(x,z] \notin S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><span class="mord"><span class="mrel">∈</span></span><span class="mord vbox"><span class="thinbox"><span class="llap"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="inner"><span class="mord"><span class="mord">/</span><span class="mspace" style="margin-right:0.0556em;"></span></span></span><span class="fix"></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> for some <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>z</mi><mo>></mo><mi>x</mi></mrow><annotation encoding="application/x-tex">z > x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span>.</li>
<li>There exists a <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>y</mi><mo>></mo><mi>x</mi></mrow><annotation encoding="application/x-tex">y > x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span> such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">]</mo><mo>∈</mo><mi>S</mi></mrow><annotation encoding="application/x-tex">[x,y] \in S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> (using 2 from real induction).</li>
</ol>
<p>Therefore, any point <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>w</mi></mrow><annotation encoding="application/x-tex">w</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02691em;">w</span></span></span></span> such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>w</mi><mo>></mo><mi>x</mi></mrow><annotation encoding="application/x-tex">w > x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02691em;">w</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span>, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>w</mi><mo>≤</mo><mi>z</mi></mrow><annotation encoding="application/x-tex">w \leq z</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.02691em;">w</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span></span></span></span>, and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>w</mi><mo>≤</mo><mi>y</mi></mrow><annotation encoding="application/x-tex">w \leq y</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.02691em;">w</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span></span> is both in <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>S</mi></mrow><annotation encoding="application/x-tex">S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span> and not in <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>S</mi></mrow><annotation encoding="application/x-tex">S</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">S</span></span></span></span>. This is a contradiction.</p>
</div>
<p>Proving statements directly in this way is clearer to people unfamiliar with real induction. This is especially true when you express the above argument in terms of your problem.</p>
<h2>Example</h2>
<p>As an example, we will apply this method to prove a lemma in <a href="https://www.matthewthom.as/papers/asymmetric-all-pay-auctions-with-spillovers/">my current working paper</a>. The proof in the paper does not use real induction directly. It instead uses the direct argument expressed in the previous section. In this section, we will apply real induction in order to demonstrate the method.</p>
<p>In this paper, we show that a particular candidate probability density is the distribution for the Nash equilibrium for a class of auctions. In this lemma, we want to prove that this candidate can be a probability density – i.e. it’s positive and integrates to one.</p>
<h3>Assumptions</h3>
<p>Consider the following assumptions on two functions <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>v</mi><mo>:</mo><msup><mi mathvariant="double-struck">R</mi><mn>2</mn></msup><mo>→</mo><mi mathvariant="double-struck">R</mi></mrow><annotation encoding="application/x-tex">v: \mathbb{R}^2 \to \mathbb{R}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">:</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.8141em;"></span><span class="mord"><span class="mord mathbb">R</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">→</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6889em;"></span><span class="mord mathbb">R</span></span></span></span> (the value of the prize) and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>c</mi><mo>:</mo><mi mathvariant="double-struck">R</mi><mo>→</mo><mi mathvariant="double-struck">R</mi></mrow><annotation encoding="application/x-tex">c: \mathbb{R} \to \mathbb{R}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">c</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">:</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6889em;"></span><span class="mord mathbb">R</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">→</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6889em;"></span><span class="mord mathbb">R</span></span></span></span> (the cost of bidding). In the auction context, these assumptions basically say that bids are costly (A2), the prize attracts bids that are greater than zero and less than infinity (A3), and you would prefer to win the prize than lose it (A4).</p>
<p><strong>Assumption 1</strong> (A1, Smoothness)</p>
<p>The function <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">v(s; y)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>c</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">c(s)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">c</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span></span></span></span> are continuously differentiable in <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>s</mi></mrow><annotation encoding="application/x-tex">s</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">s</span></span></span></span> and continuous in <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>y</mi></mrow><annotation encoding="application/x-tex">y</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span></span> for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>s</mi></mrow><annotation encoding="application/x-tex">s</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">s</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>y</mi><mo>≤</mo><mi>s</mi></mrow><annotation encoding="application/x-tex">y \leq s</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8304em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">s</span></span></span></span>.</p>
<p><strong>Assumption 2</strong> (A2, Monotonicity)</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msup><mi>v</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo><mo><</mo><msup><mi>c</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">v'(s; y) < c'(s)
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.0519em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.0519em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span></span></span></span></span></p>
<p>holds a.e., where we define <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>v</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo><mo>:</mo><mo>=</mo><mfrac><mrow><mi mathvariant="normal">∂</mi><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo></mrow><mrow><mi mathvariant="normal">∂</mi><mi>s</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">v'(s; {y}) := \frac{\partial v(s; {y})}{\partial s}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.0019em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7519em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">:=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.355em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.01em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight" style="margin-right:0.05556em;">∂</span><span class="mord mathnormal mtight">s</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight" style="margin-right:0.05556em;">∂</span><span class="mord mathnormal mtight" style="margin-right:0.03588em;">v</span><span class="mopen mtight">(</span><span class="mord mathnormal mtight">s</span><span class="mpunct mtight">;</span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">y</span></span><span class="mclose mtight">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>.</p>
<p><strong>Assumption 3</strong> (A3, Interiority)</p>
<p><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>v</mi><mo stretchy="false">(</mo><mn>0</mn><mo separator="true">,</mo><mn>0</mn><mo stretchy="false">)</mo><mo>></mo><mi>c</mi><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">v(0, 0) > c(0) = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">c</span><span class="mopen">(</span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mrow><mi>lim</mi><mo></mo></mrow><mrow><mi>s</mi><mo>→</mo><mi mathvariant="normal">∞</mi></mrow></msub><msub><mrow><mi>sup</mi><mo></mo></mrow><mrow><mi>y</mi><mo>≤</mo><mi>s</mi></mrow></msub><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo><mo><</mo><msub><mrow><mi>lim</mi><mo></mo></mrow><mrow><mi>s</mi><mo>→</mo><mi mathvariant="normal">∞</mi></mrow></msub><mi>c</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">\lim_{s \to \infty} \sup_{y \leq s} v(s; {y}) < \lim_{s \to \infty} c(s).</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.1302em;vertical-align:-0.3802em;"></span><span class="mop"><span class="mop">lim</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.1514em;"><span style="top:-2.55em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span><span class="mrel mtight">→</span><span class="mord mtight">∞</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mop"><span class="mop">sup</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.201em;"><span style="top:-2.4559em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">y</span><span class="mrel mtight">≤</span><span class="mord mathnormal mtight">s</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3802em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mop"><span class="mop">lim</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.1514em;"><span style="top:-2.55em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span><span class="mrel mtight">→</span><span class="mord mtight">∞</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">c</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mord">.</span></span></span></span></p>
<p><strong>Assumption 4</strong> (A4, Positive value on the margin)</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>s</mi><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">v(s; s) > 0
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span></span></p>
<h3>Statement of the lemma</h3>
<p><strong>Lemma (Probability density)</strong> <em>The solution, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">g(s)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span></span></span></span>, to</em></p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>=</mo><mfrac><mn>1</mn><mrow><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>s</mi><mo stretchy="false">)</mo></mrow></mfrac><mrow><mo fence="true">(</mo><msup><mi>c</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>−</mo><msubsup><mo>∫</mo><mn>0</mn><mi>s</mi></msubsup><msup><mi>v</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mi>d</mi><mi>y</mi><mo fence="true">)</mo></mrow></mrow><annotation encoding="application/x-tex">g(s) = \frac{1}{v(s; s)} \left( c'(s) - \int_0^{s} v'(s , y) g(y) dy \right)
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.4em;vertical-align:-0.95em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">s</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4143em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span></span></span></span></span></p>
<p><em>is a probability density on some interval <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mover accent="true"><mi>s</mi><mo>ˉ</mo></mover><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">[0, \bar{s}]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal">s</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span>.</em></p>
<h3>Proof</h3>
<p>The finite definite integral cannot diverge because the function is continuous and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo><mo>=</mo><mfrac><mrow><msup><mi>c</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo></mrow><mrow><mi>v</mi><mo stretchy="false">(</mo><mn>0</mn><mo separator="true">;</mo><mn>0</mn><mo stretchy="false">)</mo></mrow></mfrac><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(0) = \frac{c'(0)}{v(0; 0)} > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.5845em;vertical-align:-0.52em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0645em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">v</span><span class="mopen mtight">(</span><span class="mord mtight">0</span><span class="mpunct mtight">;</span><span class="mord mtight">0</span><span class="mclose mtight">)</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight">c</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8278em;"><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen mtight">(</span><span class="mord mtight">0</span><span class="mclose mtight">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.52em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.</p>
<p>We still need to confirm that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(s) > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> on the relevant interval <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">{</mo><mi>s</mi><mo>:</mo><msubsup><mo>∫</mo><mn>0</mn><mi>s</mi></msubsup><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo>≤</mo><mn>1</mn><mo stretchy="false">}</mo></mrow><annotation encoding="application/x-tex">\{ s : \int_0^s \lvert g(y) \rvert dy \leq 1 \}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">{</span><span class="mord mathnormal">s</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">:</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.2151em;vertical-align:-0.3558em;"></span><span class="mop"><span class="mop op-symbol small-op" style="margin-right:0.19445em;position:relative;top:-0.0006em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8593em;"><span style="top:-2.3442em;margin-left:-0.1945em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.2579em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">s</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3558em;"><span></span></span></span></span></span></span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">1</span><span class="mclose">}</span></span></span></span>. We will define the probability density to be zero outside this interval so that it integrates to one.</p>
<p>We show this by real induction on the interval <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mi>T</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">[0,T]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.13889em;">T</span><span class="mclose">]</span></span></span></span> where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>T</mi></mrow><annotation encoding="application/x-tex">T</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.13889em;">T</span></span></span></span> can be any value such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mo>∫</mo><mn>0</mn><mi>T</mi></msubsup><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo>≤</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\int_0^T \lvert g(y) \rvert dy \leq 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.3921em;vertical-align:-0.3558em;"></span><span class="mop"><span class="mop op-symbol small-op" style="margin-right:0.19445em;position:relative;top:-0.0006em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0362em;"><span style="top:-2.3442em;margin-left:-0.1945em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.2579em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.13889em;">T</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3558em;"><span></span></span></span></span></span></span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>. We must prove the following statements:</p>
<ol>
<li><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(0) > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.</li>
<li>For any <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>s</mi><mo>∈</mo><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mi>T</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">s \in [0,T]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">s</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.13889em;">T</span><span class="mclose">]</span></span></span></span>$, if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(y) > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>y</mi><mo>∈</mo><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mi>s</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">y \in [0,s]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">s</span><span class="mclose">]</span></span></span></span>$, then there exists a <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>z</mi><mo>></mo><mi>s</mi></mrow><annotation encoding="application/x-tex">z > s</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">s</span></span></span></span> such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(y) > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>y</mi><mo>∈</mo><mo stretchy="false">[</mo><mi>s</mi><mo separator="true">,</mo><mi>z</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">y \in [s,z)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">s</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span></span></span></span>.</li>
<li>For any <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>s</mi><mo>∈</mo><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mi>T</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">s \in [0,T]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">s</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.13889em;">T</span><span class="mclose">]</span></span></span></span>$, if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(y) > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>y</mi><mo>∈</mo><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mi>s</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">y \in [0,s)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">s</span><span class="mclose">)</span></span></span></span>$, then <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(s) > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.</li>
</ol>
<p>The first statement is true because <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo><mo>=</mo><mfrac><mrow><msup><mi>c</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo></mrow><mrow><mi>v</mi><mo stretchy="false">(</mo><mn>0</mn><mo separator="true">;</mo><mn>0</mn><mo stretchy="false">)</mo></mrow></mfrac><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(0) = \frac{c'(0)}{v(0; 0)} > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.5845em;vertical-align:-0.52em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0645em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">v</span><span class="mopen mtight">(</span><span class="mord mtight">0</span><span class="mpunct mtight">;</span><span class="mord mtight">0</span><span class="mclose mtight">)</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight">c</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8278em;"><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen mtight">(</span><span class="mord mtight">0</span><span class="mclose mtight">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.52em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>. The second statement proceeds by continuity of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi></mrow><annotation encoding="application/x-tex">g</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span></span></span></span> (A1). The third statement comes from:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>=</mo><mfrac><mn>1</mn><mrow><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>s</mi><mo stretchy="false">)</mo></mrow></mfrac><mrow><mo fence="true">(</mo><msup><mi>c</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>−</mo><msubsup><mo>∫</mo><mn>0</mn><mi>s</mi></msubsup><msup><mi>v</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo fence="true">)</mo></mrow></mrow><annotation encoding="application/x-tex">g(s) = \frac{1}{v(s; s)} \left( c'(s) - \int_0^{s} v'(s , y) \lvert g(y) \rvert dy \right)
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.4em;vertical-align:-0.95em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">s</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4143em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span></span></span></span></span></p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>≥</mo><mfrac><mn>1</mn><mrow><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>s</mi><mo stretchy="false">)</mo></mrow></mfrac><mo fence="false" stretchy="true" minsize="2.4em" maxsize="2.4em">[</mo><msup><mi>c</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>−</mo><mo stretchy="false">∣</mo><munder><mrow><mi>max</mi><mo></mo></mrow><mrow><mi>y</mi><mo>∈</mo><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mi>s</mi><mo stretchy="false">]</mo></mrow></munder><msup><mi>v</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><munder><munder><mrow><mo fence="true">(</mo><msubsup><mo>∫</mo><mn>0</mn><mi>s</mi></msubsup><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo fence="true">)</mo></mrow><mo stretchy="true">⏟</mo></munder><mrow><mo>≤</mo><mn>1</mn></mrow></munder><mo fence="false" stretchy="true" minsize="2.4em" maxsize="2.4em">]</mo></mrow><annotation encoding="application/x-tex">g(s) \geq \frac{1}{v(s; s)} \bigg[ c'(s) - \lvert \max_{y\in[0,s]} v'(s; y) \rvert \underbrace{\left( \int_0^{s} \lvert g(y) \rvert dy \right)}_{\leq 1} \bigg]
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.4em;vertical-align:-0.95em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">s</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord"><span class="delimsizing size3">[</span></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:3.7943em;vertical-align:-2.3443em;"></span><span class="mopen">∣</span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.309em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">y</span><span class="mrel mtight">∈</span><span class="mopen mtight">[</span><span class="mord mtight">0</span><span class="mpunct mtight">,</span><span class="mord mathnormal mtight">s</span><span class="mclose mtight">]</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.966em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord munder"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.45em;"><span style="top:-1.2009em;"><span class="pstrut" style="height:3.45em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mrel mtight">≤</span><span class="mord mtight">1</span></span></span></span><span style="top:-3.45em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord munder"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.45em;"><span class="svg-align" style="top:-1.852em;"><span class="pstrut" style="height:3.45em;"></span><span class="stretchy" style="height:0.548em;min-width:1.6em;"><span class="brace-left" style="height:0.548em;"><svg xmlns="http://www.w3.org/2000/svg" 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-5-4-11-12-44.7-59.3-101.3-106.3-170-141s-145.3-54.3-229-60H0V214z"></path></svg></span><span class="brace-right" style="height:0.548em;"><svg xmlns="http://www.w3.org/2000/svg" width="400em" height="0.548em" viewBox="0 0 400000 548" preserveAspectRatio="xMaxYMin slice"><path d="M399994 0l6 6v35l-6 11c-56 104-135.3 181.3-238 232-57.3
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-174 2.7-5 6-9 10-13 .7-1 7.3-1 20-1h17z"></path></svg></span></span></span><span style="top:-3.45em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4143em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.598em;"><span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.3443em;"><span></span></span></span></span></span><span class="mord"><span class="delimsizing size3">]</span></span></span></span></span></span></p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>≥</mo><mfrac><mn>1</mn><mrow><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>s</mi><mo stretchy="false">)</mo></mrow></mfrac><munder><munder><mrow><mo fence="true">[</mo><msup><mi>c</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>−</mo><mo stretchy="false">∣</mo><munder><mrow><mi>max</mi><mo></mo></mrow><mi>y</mi></munder><msup><mi>v</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msup><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mo fence="true">]</mo></mrow><mo stretchy="true">⏟</mo></munder><mrow><mo>></mo><mn>0</mn><mtext>(A2)</mtext></mrow></munder><mo>></mo><mn>0.</mn></mrow><annotation encoding="application/x-tex">g(s) \geq \frac{1}{v(s; s)} \underbrace{\left[c'(s) - \lvert \max_y v'(s; y) \rvert \right]}_{>0 \text{(A2)}} > 0.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:3.948em;vertical-align:-2.498em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">s</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord munder"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.45em;"><span style="top:-1.127em;"><span class="pstrut" style="height:3.45em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mrel mtight">></span><span class="mord mtight">0</span><span class="mord text mtight"><span class="mord mtight">(A2)</span></span></span></span></span><span style="top:-3.45em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord munder"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.45em;"><span class="svg-align" style="top:-1.852em;"><span class="pstrut" style="height:3.45em;"></span><span class="stretchy" style="height:0.548em;min-width:1.6em;"><span class="brace-left" style="height:0.548em;"><svg xmlns="http://www.w3.org/2000/svg" width="400em" height="0.548em" viewBox="0 0 400000 548" preserveAspectRatio="xMinYMin slice"><path d="M0 6l6-6h17c12.688 0 19.313.3 20 1 4 4 7.313 8.3 10 13
35.313 51.3 80.813 93.8 136.5 127.5 55.688 33.7 117.188 55.8 184.5 66.5.688
0 2 .3 4 1 18.688 2.7 76 4.3 172 5h399450v120H429l-6-1c-124.688-8-235-61.7
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c100.7 8.3 195.3 44 280 108 55.3 42 101.7 93 139 153l9 14c2.7-4 5.7-8.7 9-14
53.3-86.7 123.7-153 211-199 66.7-36 137.3-56.3 212-62h199568v120H200432c-178.3
11.7-311.7 78.3-403 201-6 8-9.7 12-11 12-.7.7-6.7 1-18 1s-17.3-.3-18-1c-1.3 0
-5-4-11-12-44.7-59.3-101.3-106.3-170-141s-145.3-54.3-229-60H0V214z"></path></svg></span><span class="brace-right" style="height:0.548em;"><svg xmlns="http://www.w3.org/2000/svg" width="400em" height="0.548em" viewBox="0 0 400000 548" preserveAspectRatio="xMaxYMin slice"><path d="M399994 0l6 6v35l-6 11c-56 104-135.3 181.3-238 232-57.3
28.7-117 45-179 50H-300V214h399897c43.3-7 81-15 113-26 100.7-33 179.7-91 237
-174 2.7-5 6-9 10-13 .7-1 7.3-1 20-1h17z"></path></svg></span></span></span><span style="top:-3.45em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">[</span></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">∣</span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.4em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">y</span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.8361em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">]</span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.598em;"><span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.498em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0.</span></span></span></span></span></p>
<p>Therefore, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(s) > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> for any <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>s</mi></mrow><annotation encoding="application/x-tex">s</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">s</span></span></span></span> such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mo>∫</mo><mn>0</mn><mi>s</mi></msubsup><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo>≤</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\int_0^s \lvert g(y) \rvert dy \leq 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2151em;vertical-align:-0.3558em;"></span><span class="mop"><span class="mop op-symbol small-op" style="margin-right:0.19445em;position:relative;top:-0.0006em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8593em;"><span style="top:-2.3442em;margin-left:-0.1945em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.2579em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">s</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3558em;"><span></span></span></span></span></span></span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>.</p>
<p>To complete the lemma, we must show that it is not possible for <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mo>∫</mo><mn>0</mn><mi mathvariant="normal">∞</mi></msubsup><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo>≤</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\int_0^\infty \lvert g(y) \rvert dy \leq 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2151em;vertical-align:-0.3558em;"></span><span class="mop"><span class="mop op-symbol small-op" style="margin-right:0.19445em;position:relative;top:-0.0006em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8593em;"><span style="top:-2.3442em;margin-left:-0.1945em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.2579em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">∞</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3558em;"><span></span></span></span></span></span></span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>. We can do this in one step with Holder’s inequality.</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>c</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo><mo>=</mo><msubsup><mo>∫</mo><mn>0</mn><mi>s</mi></msubsup><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mi>d</mi><mi>y</mi><mo>≤</mo><mrow><mo fence="true">(</mo><msubsup><mo>∫</mo><mn>0</mn><mi>s</mi></msubsup><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo fence="true">)</mo></mrow><mrow><mo fence="true">(</mo><munder><mrow><mi>max</mi><mo></mo></mrow><mrow><mi>y</mi><mo>∈</mo><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mi>s</mi><mo stretchy="false">]</mo></mrow></munder><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo><mo fence="true">)</mo></mrow></mrow><annotation encoding="application/x-tex">c(s) = \int_0^s v(s; y) g (y) dy \leq \left(\int_0^s \lvert g(y) \rvert dy\right) \left( \max_{y \in [0,s]} v(s; y) \right)
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">c</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.3262em;vertical-align:-0.9119em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4143em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">s</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.416em;vertical-align:-0.966em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4143em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">s</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.309em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">y</span><span class="mrel mtight">∈</span><span class="mopen mtight">[</span><span class="mord mtight">0</span><span class="mpunct mtight">,</span><span class="mord mathnormal mtight">s</span><span class="mclose mtight">]</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.966em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mopen">(</span><span class="mord mathnormal">s</span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span></span></span></span></span></p>
<p>so <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mo>∫</mo><mn>0</mn><mi>s</mi></msubsup><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo>≥</mo><mfrac><mrow><mi>c</mi><mo stretchy="false">(</mo><mi>s</mi><mo stretchy="false">)</mo></mrow><mrow><mi>max</mi><mo></mo><mi>v</mi><mo stretchy="false">(</mo><mi>s</mi><mo separator="true">;</mo><mi>y</mi><mo stretchy="false">)</mo></mrow></mfrac></mrow><annotation encoding="application/x-tex">\int_0^s \lvert g(y) \rvert dy \geq \frac{c(s)}{\max v(s; y)}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2151em;vertical-align:-0.3558em;"></span><span class="mop"><span class="mop op-symbol small-op" style="margin-right:0.19445em;position:relative;top:-0.0006em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8593em;"><span style="top:-2.3442em;margin-left:-0.1945em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.2579em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">s</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3558em;"><span></span></span></span></span></span></span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.53em;vertical-align:-0.52em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.01em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mop mtight"><span class="mtight">m</span><span class="mtight">a</span><span class="mtight">x</span></span><span class="mspace mtight" style="margin-right:0.1952em;"></span><span class="mord mathnormal mtight" style="margin-right:0.03588em;">v</span><span class="mopen mtight">(</span><span class="mord mathnormal mtight">s</span><span class="mpunct mtight">;</span><span class="mord mathnormal mtight" style="margin-right:0.03588em;">y</span><span class="mclose mtight">)</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">c</span><span class="mopen mtight">(</span><span class="mord mathnormal mtight">s</span><span class="mclose mtight">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.52em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span> which is assumed to be greater than one as <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>s</mi></mrow><annotation encoding="application/x-tex">s</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">s</span></span></span></span> approaches infinity (A3). By continuity, there exists an <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mover accent="true"><mi>s</mi><mo>ˉ</mo></mover></mrow><annotation encoding="application/x-tex">\bar{s}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5678em;"></span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal">s</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span></span></span></span> such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mo>∫</mo><mn>0</mn><mover accent="true"><mi>s</mi><mo>ˉ</mo></mover></msubsup><mo stretchy="false">∣</mo><mi>g</mi><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo><mo stretchy="false">∣</mo><mi>d</mi><mi>y</mi><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\int_0^{\bar{s}} \lvert g (y) \rvert dy = 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.3112em;vertical-align:-0.3558em;"></span><span class="mop"><span class="mop op-symbol small-op" style="margin-right:0.19445em;position:relative;top:-0.0006em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.9553em;"><span style="top:-2.3442em;margin-left:-0.1945em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.2579em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord accent mtight"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-2.7em;"><span class="pstrut" style="height:2.7em;"></span><span class="mord mathnormal mtight">s</span></span><span style="top:-2.7em;"><span class="pstrut" style="height:2.7em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord mtight">ˉ</span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3558em;"><span></span></span></span></span></span></span><span class="mopen">∣</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)∣</span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> (A1).</p>
How to Prevent Email Scraping
2021-03-10T00:00:00Z
https://www.matthewthom.as/blog/stop-email-scraping/
<p>If put your email in plaintext on your website, you will get spam from people trying to sell you SEO, development services, ghostwriting, etc. Emails get on spam lists through website scraping. The way that this works is simple. Scrapers typically look for strings like <code>user@host.tld</code> or <code>mailto:user@host.tld</code> in your HTML.</p>
<p>I used to use the Scrape Shield provided by Cloudflare. However, when I switched away from using Cloudflare a few months ago, I started to receive a lot of spam that could not be easily blocked. There are many solutions that you can find on the internet to stop people from scraping your email. The most common is to write your email as:</p>
<pre><code>user [at] host [dot] tld
</code></pre>
<p>This is not ideal for three reasons:</p>
<ol>
<li>People usually have to edit your email before using it (though GMail does this automatically 🧪).</li>
<li>This string is just as easy to scrape as <code>user@host.tld</code>. It’s just a little less common.</li>
<li>It’s not feasible for use in a mailto link.</li>
</ol>
<p>This third issue is the most difficult to fix as there are many solutions that work for displaying an email if you don’t care about functional <code>mailto:</code> links. For example</p>
<pre><code class="language-html"><span>user@</span>
<span style="display:none;">HIDDEN JUNK</span>
<span>host.tld</span>
</code></pre>
<p>or the equivalent with CSS.</p>
<p>There are two solutions that I know of that fix the problem and allow <code>mailto:</code> links to work. The first is common and easy for scrapers to circumvent while the other is harder to circumvent, but requires javascript.</p>
<h3>Solution 1: HTML entities</h3>
<p>One simple and very common solution is to replace all characters in the <code>mailto:</code> links with HTML entities. For example <code>user@host.tld</code> becomes <code>&#x75;&#x73;&#x65;&#x72;&#x40;&#x68;&#x6F;&#x73;&#x74;&#x2E;&#x74;&#x6C;&#x64;</code>. You can then make an email link like so</p>
<pre><code class="language-html"><a href="mailto:&#x75;&#x73;&#x65;&#x72;&#x40;&#x68;&#x6F;&#x73;&#x74;&#x2E;&#x74;&#x6C;&#x64;">email me</a>
</code></pre>
<p>which renders as <a href="mailto:user@host.tld">email me</a>. As you can see, the browser translates these HTML entities completely for the end user. So this obfuscation does not create any issues for human visitors. However, it is very easy to transform all HTML entities before scraping. So, this offers only minimal protection.</p>
<h3>Solution 2: Trivial javascript replace</h3>
<p>I have tested a very simple method in javascript for the last few months. The idea is to replace your email with the correct string using javascript. A simplified version of my implementation follows.</p>
<pre><code class="language-html"><script>
/* 1. define variables */
var me = "name";
var place = "host.tld";
/* 2. find email link to replace */
var elink = document.getElementById("mlink");
/* 3. replace link href with variables */
elink.href = `mailto:${me}@${place}`;
</script>
<a id="mlink" href="#">email me</a>
</code></pre>
<p>So, we define the email in two parts, <code>name</code> and <code>host.tld</code>. We then combine these parts and put them into the email link. This solution is simple and resistant to scraping. The easiest way to scrape this document would be to execute the above javascript. However, scrapers do not execute javascript on arbitrary pages for several reasons. First, it is not performant to execute javascript on the thousands of websites that you scrape. Second, it opens scrapers up to various types of attacks and tracking that they would prefer to avoid.</p>
<p>At some point, scrapers may evolve to the point that such a simple method is not effective. However, I have found that I no longer receive spam after making this change. While I am generally against adding unnecessary javascript to pages, as it slows them down, I feel this snippet is both necessary and highly performant.</p>
<p>This javascript method is similar to the one used by CloudFlare’s builtin Scrape Shield, but is simpler. Cloudflare uses a hash that is decoded in javascript by using the last few characters as a “key” to unlock the hashed email.</p>
<h3>Does it work?</h3>
<p>I use the second method on my site and can confirm that it works. A few months ago, I ran an experiment to see if the spammers were really getting my email from my website. In the test, I replaced the email in the HTML of my site with a dummy address, <code>6adegxtzp@relay.firefox.com</code>, which I still receive. However, I sort these into a special folder. When, the page loads, my script replaces this email with my main address. Human visitors with javascript enabled do not encounter this address.</p>
<p>Since making this change, I no longer receive spam on my main email. However, I receive a significant amount of spam though my Firefox relay address. This is despite the fact that I have never used this address anywhere else. This change took a few months though. So don’t expect results right away.</p>
Mechanisms to Fund Open Source
2021-03-11T00:00:00Z
https://www.matthewthom.as/blog/fund-open-source/
<p>I recently came across <a href="https://econpapers.repec.org/RePEc:inm:ormnsc:v:65:y:2019:i:11:p:5171-5187">a paper</a> published in Management Science that proposes Quadratic Finance (QF), a a quadratic voting mechanism to allocate funds to public goods such as open source software. This has generated an understandable amount of excitement and there are already several cases in which it has been implemented.</p>
<ul>
<li><a href="https://fundoss.org/">FundOSS</a></li>
<li><a href="https://gitcoin.co/grants/">Gitcoin Grants</a></li>
<li><a href="https://downtownstimulus.com/">Downtown Stimulus</a></li>
<li><a href="https://clr.fund/">clr.fund</a></li>
</ul>
<p>This mechanism has also been referred to as <a href="https://scholar.archive.org/search?q=key:work_owdeblsi4vcerjx7h6wq6vnevq">Liberal Radicalism</a> or LR.</p>
<p>I wanted to take the time to clarify a few common misconceptions about QF and explain what it actually is and is not. Moreover, implementations of QF have modified the mechanism in ways that are not efficient and often dominated by more common allocation approaches.</p>
<p>The basic problem with funding a public good is that people do not pay if they can take advantage of the good for free. So, collected payments/donations are always less than they should be. This is not a problem that QF solves. Several sources claim QF is “the mathematically optimal way to fund public goods in a democratic community” <a href="https://wtfisqf.com/">(Gitcoin)</a>. This is not entirely true. QF was not designed to solve the problem of <em>funding</em> public goods. It is not a mechanism for optimal fundraising. It was instead designed to solve the following problem:</p>
<blockquote>
<p>How can we efficiently allocate resources to public goods given that we have <em>unlimited</em> access to resources.</p>
</blockquote>
<p>Note that this is not a fundraising problem. It is a <em>voting</em> problem. QF was not designed to have the greatest revenue of any mechanism. It doesn’t tell you how to raise money. It instead tells you where you should put it once it is raised. QF is a system where people “vote with their wallets” to allocate resources. Yes, it raises funds as part of the process, but this is not the point.</p>
<p>This is a classic Economic problem that was technically solved by Vickrey, Clarke, and Groves in <a href="https://econpapers.repec.org/RePEc:bla:jfinan:v:16:y:1961:i:1:p:8-37">three</a> <a href="https://econpapers.repec.org/RePEc:kap:pubcho:v:11:y:1971:i:1:p:17-33">separate</a> <a href="https://econpapers.repec.org/RePEc:ecm:emetrp:v:41:y:1973:i:4:p:617-31">papers</a>. A quick summary of their mechanism (VCG) is essential for understanding what QF is about.</p>
<h2>Classic VCG</h2>
<p>The idea behind VCG is pretty simple. Suppose we are looking at <a href="https://opencollective.com/webpack">funding webpack</a>, a popular open source project. Suppose the value for person <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>i</mi></mrow><annotation encoding="application/x-tex">i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6595em;"></span><span class="mord mathnormal">i</span></span></span></span> of webpack having an annual budget of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi></mrow><annotation encoding="application/x-tex">x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span> is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>v</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">v_i(x)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span></span></span></span> where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>v</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">v_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is a concave, differentiable, and increasing function<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/fund-open-source/#fn1" id="fnref1">[1]</a></sup> with <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>v</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo><mo>≡</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">v_i(0) \equiv 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≡</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>. The efficient level of funding for webpack is the <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>x</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">x^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span> that maximizes society’s payoff:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable width="100%"><mtr><mtd width="50%"></mtd><mtd><mrow><mrow><mo fence="true">[</mo><munder><mo>∑</mo><mi>i</mi></munder><msub><mi>v</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo fence="true">]</mo></mrow><mo>−</mo><mi>x</mi><mi mathvariant="normal">.</mi></mrow></mtd><mtd width="50%"></mtd><mtd><mtext>(1)</mtext></mtd></mtr></mtable><annotation encoding="application/x-tex">\left[ \sum_{i} v_i(x) \right] - x. \tag{1}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:3.0277em;vertical-align:-1.2777em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size4">[</span></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8723em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.2777em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size4">]</span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span><span class="mord">.</span></span><span class="tag"><span class="strut" style="height:3.0277em;vertical-align:-1.2777em;"></span><span class="mord text"><span class="mord">(</span><span class="mord"><span class="mord">1</span></span><span class="mord">)</span></span></span></span></span></span></p>
<p>However, people only care about their own value – not the value of others. So, they would not be willing to give as much. To fix this, we conduct a three step process.</p>
<ol>
<li>Ask everyone for their <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>v</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">v_i(x)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span></span></span></span>.</li>
<li>Find the <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>x</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">x^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span> that maximizes equation 1.</li>
<li>Give each agent a (possibly negative) transfer of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mrow><mo fence="true">[</mo><msub><mo>∑</mo><mrow><mi>j</mi><mo mathvariant="normal">≠</mo><mi>i</mi></mrow></msub><msub><mi>v</mi><mi>j</mi></msub><mo stretchy="false">(</mo><msup><mi>x</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo><mo fence="true">]</mo></mrow><mo>−</mo><msup><mi>x</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">\left[ \sum_{j \neq i} v_j( x^\star ) \right] - x^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.8em;vertical-align:-0.65em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size2">[</span></span><span class="mop"><span class="mop op-symbol small-op" style="position:relative;top:0em;">∑</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.1864em;"><span style="top:-2.4003em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.05724em;">j</span><span class="mrel mtight"><span class="mrel mtight"><span class="mord vbox mtight"><span class="thinbox mtight"><span class="rlap mtight"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="inner"><span class="mord mtight"><span class="mrel mtight"></span></span></span><span class="fix"></span></span></span></span></span><span class="mrel mtight">=</span></span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4358em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.05724em;">j</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size2">]</span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span>.</li>
</ol>
<p>When they add their own <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>v</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">v_i(x)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span></span></span></span> to the transfer, their personal payoff is exactly the same as society’s (Equation 1). Because of this, they want <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>x</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">x^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span> to be calculated correctly. So, they have no reason to lie about their value, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>v</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">v_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span>.</p>
<p>The transfers noted above are very expensive. However, they can be made much cheaper because you can subtract any constant from these transfers. In fact, you can subtract any function that does not depend on <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>v</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">v_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span>.<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/fund-open-source/#fn2" id="fnref2">[2]</a></sup> When the ideal function is chosen,<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/fund-open-source/#fn3" id="fnref3">[3]</a></sup> the assumptions we made ensure the VCG mechanism raises funds from each person. The amount raised from person <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>i</mi></mrow><annotation encoding="application/x-tex">i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6595em;"></span><span class="mord mathnormal">i</span></span></span></span> is.</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><munder><mrow><mi>max</mi><mo></mo></mrow><mi>x</mi></munder><mrow><mo fence="true">(</mo><mrow><mo fence="true">[</mo><munder><mo>∑</mo><mrow><mi>j</mi><mo mathvariant="normal">≠</mo><mi>i</mi></mrow></munder><msub><mi>v</mi><mi>j</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo fence="true">]</mo></mrow><mo>−</mo><mi>x</mi><mo fence="true">)</mo></mrow><mo>−</mo><mrow><mo fence="true">(</mo><mrow><mo fence="true">[</mo><munder><mo>∑</mo><mrow><mi>j</mi><mo mathvariant="normal">≠</mo><mi>i</mi></mrow></munder><msub><mi>v</mi><mi>j</mi></msub><mo stretchy="false">(</mo><msup><mi>x</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo><mo fence="true">]</mo></mrow><mo>−</mo><msup><mi>x</mi><mo>⋆</mo></msup><mo fence="true">)</mo></mrow><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\max_x \left( \left[ \sum_{j \neq i} v_j( x ) \right] - x \right) - \left( \left[ \sum_{j \neq i} v_j( x^\star ) \right] - x^\star \right) > 0
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:3.6em;vertical-align:-1.55em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.4em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">x</span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.05em;"><span style="top:-4.05em;"><span class="pstrut" style="height:5.6em;"></span><span style="width:0.875em;height:3.600em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.875em" height="3.600em" viewBox="0 0 875 3600"><path d="M863,9c0,-2,-2,-5,-6,-9c0,0,-17,0,-17,0c-12.7,0,-19.3,0.3,-20,1
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H403z M403 1759 V0 H319 V1759 v0 v1759 h84z"></path></svg></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.55em;"><span></span></span></span></span></span></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8479em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.05724em;">j</span><span class="mrel mtight"><span class="mrel mtight"><span class="mord vbox mtight"><span class="thinbox mtight"><span class="rlap mtight"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="inner"><span class="mord mtight"><span class="mrel mtight"></span></span></span><span class="fix"></span></span></span></span></span><span class="mrel mtight">=</span></span><span class="mord mathnormal mtight">i</span></span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.4382em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.05724em;">j</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mclose"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.05em;"><span style="top:-4.05em;"><span class="pstrut" style="height:5.6em;"></span><span style="width:0.667em;height:3.600em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.667em" height="3.600em" viewBox="0 0 667 3600"><path d="M347 1759 V0 H0 V84 H263 V1759 v0 v1759 H0 v84 H347z
M347 1759 V0 H263 V1759 v0 v1759 h84z"></path></svg></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.55em;"><span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">x</span><span class="mclose"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.05em;"><span style="top:-4.05em;"><span class="pstrut" style="height:5.6em;"></span><span style="width:0.875em;height:3.600em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.875em" height="3.600em" viewBox="0 0 875 3600"><path d="M76,0c-16.7,0,-25,3,-25,9c0,2,2,6.3,6,13c21.3,28.7,42.3,60.3,
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H403z M403 1759 V0 H319 V1759 v0 v1759 h84z"></path></svg></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.55em;"><span></span></span></span></span></span></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8479em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.05724em;">j</span><span class="mrel mtight"><span class="mrel mtight"><span class="mord vbox mtight"><span class="thinbox mtight"><span class="rlap mtight"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="inner"><span class="mord mtight"><span class="mrel mtight"></span></span></span><span class="fix"></span></span></span></span></span><span class="mrel mtight">=</span></span><span class="mord mathnormal mtight">i</span></span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.4382em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.05724em;">j</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mclose"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.05em;"><span style="top:-4.05em;"><span class="pstrut" style="height:5.6em;"></span><span style="width:0.667em;height:3.600em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.667em" height="3.600em" viewBox="0 0 667 3600"><path d="M347 1759 V0 H0 V84 H263 V1759 v0 v1759 H0 v84 H347z
M347 1759 V0 H263 V1759 v0 v1759 h84z"></path></svg></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.55em;"><span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.05em;"><span style="top:-4.05em;"><span class="pstrut" style="height:5.6em;"></span><span style="width:0.875em;height:3.600em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.875em" height="3.600em" viewBox="0 0 875 3600"><path d="M76,0c-16.7,0,-25,3,-25,9c0,2,2,6.3,6,13c21.3,28.7,42.3,60.3,
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<p>There is no incentive compatible efficient mechanism that raises more total funds <a href="https://econpapers.repec.org/RePEc:wpa:wuwpga:9703010">(Krishna and Perry 1998)</a>.</p>
<h3>Issues</h3>
<p>There are two major issues with the VCG mechanism:</p>
<ol>
<li>It requires too much information</li>
<li>It fails if bidders can work together (i.e. collude)</li>
<li>It can raise less than <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>x</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">x^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span> and thus requires subsidization</li>
</ol>
<p>VCG requires each participant to submit their exact valuation for each level of total funding for every open source project. This imposes a preparation cost for most participants as they likely do not know these valuations offhand. Issue 2 is somewhat overblown as the ways to cheat in VCG are generally NP-hard to compute. However, there are interesting restricted cases where the optimal collusion scheme can be computed in polynomial time.</p>
<p>The third issue is an important one that cannot be easily solved. Remember that there is no incentive compatible efficient mechanism that collects more revenue than VCG. So, collecting more funds requires sacrificing efficiency – an issue not dealt with here.</p>
<h2>Quadratic finance</h2>
<p>The aforementioned paper considers QF, a different allocation mechanism which solves the first issue with VCG (i.e. that it requires too much information) and it solves this brilliantly.</p>
<p>The QF mechanism allocates resources according to</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable width="100%"><mtr><mtd width="50%"></mtd><mtd><mrow><msup><mi>x</mi><mo>⋆</mo></msup><mo>=</mo><msup><mrow><mo fence="true">(</mo><munder><mo>∑</mo><mi>i</mi></munder><msqrt><msub><mi>c</mi><mi>i</mi></msub></msqrt><mo fence="true">)</mo></mrow><mn>2</mn></msup></mrow></mtd><mtd width="50%"></mtd><mtd><mtext>(2)</mtext></mtd></mtr></mtable><annotation encoding="application/x-tex">x^\star = \left( \sum_i \sqrt{c_i} \right)^2 \tag{2}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7387em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:3.2317em;vertical-align:-1.2777em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size4">(</span></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8723em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.2777em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord sqrt"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7742em;"><span class="svg-align" style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord" style="padding-left:0.833em;"><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span><span style="top:-2.7342em;"><span class="pstrut" style="height:3em;"></span><span class="hide-tail" style="min-width:0.853em;height:1.08em;"><svg xmlns="http://www.w3.org/2000/svg" width="400em" height="1.08em" viewBox="0 0 400000 1080" preserveAspectRatio="xMinYMin slice"><path d="M95,702
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M834 80h400000v40h-400000z"></path></svg></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2658em;"><span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size4">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:1.954em;"><span style="top:-4.2029em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span><span class="tag"><span class="strut" style="height:3.2317em;vertical-align:-1.2777em;"></span><span class="mord text"><span class="mord">(</span><span class="mord"><span class="mord">2</span></span><span class="mord">)</span></span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>c</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">c_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is an individual contribution made by each participant. So, participants no longer need to send their value for every level of funding. They just need to choose a contribution. This requires less information on the part of the contributors. It is also more private because less information is surrendered. The main point of the paper is that, in equilibrium, this <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>x</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">x^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span> is the same as the one we considered in the VCG section.</p>
<p>The goal of QF is not to maximize <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mo>∑</mo><mi>i</mi></msub><msub><mi>c</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">\sum_i c_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.0497em;vertical-align:-0.2997em;"></span><span class="mop"><span class="mop op-symbol small-op" style="position:relative;top:0em;">∑</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.162em;"><span style="top:-2.4003em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2997em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span>, but to instead find a function that achieves the socially optimal resource allocation, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>x</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">x^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span>.</p>
<p>The deficit of QR is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>D</mi><mrow><mi>Q</mi><mi>F</mi></mrow></msub><mo>=</mo><msup><mi>x</mi><mo>⋆</mo></msup><mo>−</mo><munder><mo>∑</mo><mi>i</mi></munder><msub><mi>c</mi><mi>i</mi></msub><mo>=</mo><msup><mrow><mo fence="true">(</mo><munder><mo>∑</mo><mi>i</mi></munder><msqrt><msub><mi>c</mi><mi>i</mi></msub></msqrt><mo fence="true">)</mo></mrow><mn>2</mn></msup><mo>−</mo><munder><mo>∑</mo><mi>i</mi></munder><msub><mi>c</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">D_{QF} = x^\star - \sum_i c_i = \left( \sum_i \sqrt{c_i} \right)^2 - \sum_i c_i
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.9694em;vertical-align:-0.2861em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">D</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0278em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.13889em;">QF</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.822em;vertical-align:-0.0833em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:2.3277em;vertical-align:-1.2777em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8723em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.2777em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:3.2317em;vertical-align:-1.2777em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size4">(</span></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8723em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.2777em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord sqrt"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7742em;"><span class="svg-align" style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord" style="padding-left:0.833em;"><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span><span style="top:-2.7342em;"><span class="pstrut" style="height:3em;"></span><span class="hide-tail" 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<p>which is positive when there is more than one contributor by <a href="https://en.wikipedia.org/wiki/Jensen%27s_inequality">Jensen’s inequality</a>. Therefore, outside funding is always required for QR.</p>
<h3>Issues</h3>
<p>The issues with QF are similar to VCG.</p>
<ol>
<li>It fails if bidders can work together (i.e. collude)</li>
<li>There is always a deficit and it is typically larger than with VCG</li>
</ol>
<p>Collusion in QF is particularly easy. If you want to contribute <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>c</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">c_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> and have friends who want to contribute nothing, then you can do better by contributing less and dividing your contributions amongst your friends.</p>
<p>The second problem is a big problem for applying both QF and VCG because the deficit is can be difficult to predict. Therefore, unlimited resources are needed guarantee that the costs are covered. This is somewhat reasonable for governments who can tax their citizens.<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/fund-open-source/#fn4" id="fnref4">[4]</a></sup></p>
<p>It is not reasonable when the funds are raised by a foundation or philanthropist. What do you do if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>D</mi><mrow><mi>Q</mi><mi>F</mi></mrow></msub></mrow><annotation encoding="application/x-tex">D_{QF}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.9694em;vertical-align:-0.2861em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">D</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0278em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.13889em;">QF</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span></span></span></span> is larger than your grant funding, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>G</mi></mrow><annotation encoding="application/x-tex">G</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span></span></span></span>? However, the authors note this problem and propose an approximate solution called CQF (also known as CLR)</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msup><mi>x</mi><mo>∘</mo></msup><mo>=</mo><mi>α</mi><msup><mrow><mo fence="true">(</mo><munder><mo>∑</mo><mi>i</mi></munder><msqrt><msub><mi>c</mi><mi>i</mi></msub></msqrt><mo fence="true">)</mo></mrow><mn>2</mn></msup><mo>+</mo><mo stretchy="false">(</mo><mn>1</mn><mo>−</mo><mi>α</mi><mo stretchy="false">)</mo><munder><mo>∑</mo><mi>i</mi></munder><msub><mi>c</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">x^\circ = \alpha \left( \sum_i \sqrt{c_i} \right)^2 + (1 - \alpha) \sum_i c_i
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7241em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7241em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">∘</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:3.2317em;vertical-align:-1.2777em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size4">(</span></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8723em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.2777em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord sqrt"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7742em;"><span class="svg-align" style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord" style="padding-left:0.833em;"><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span><span style="top:-2.7342em;"><span class="pstrut" style="height:3em;"></span><span class="hide-tail" style="min-width:0.853em;height:1.08em;"><svg xmlns="http://www.w3.org/2000/svg" width="400em" height="1.08em" viewBox="0 0 400000 1080" preserveAspectRatio="xMinYMin slice"><path d="M95,702
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M834 80h400000v40h-400000z"></path></svg></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2658em;"><span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size4">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:1.954em;"><span style="top:-4.2029em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:2.3277em;vertical-align:-1.2777em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8723em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.2777em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mn>0</mn><mo>≤</mo><mi>α</mi><mo>≤</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">0 \leq \alpha \leq 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7804em;vertical-align:-0.136em;"></span><span class="mord">0</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>. When <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>α</mi><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\alpha = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>, CQF is the standard donation model with no subsidies. When <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>α</mi><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\alpha = 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>, CQF is the same as QF and thus achieves the optimal allocation. At every <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>α</mi></mrow><annotation encoding="application/x-tex">\alpha</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span></span></span></span> in between, CQF is a mix of the two. The deficit of CQF is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>D</mi><mrow><mi>C</mi><mi>Q</mi><mi>F</mi></mrow></msub><mo>=</mo><msup><mi>x</mi><mo>∘</mo></msup><mo>−</mo><munder><mo>∑</mo><mi>i</mi></munder><msub><mi>c</mi><mi>i</mi></msub><mo>=</mo><mi>α</mi><msub><mi>D</mi><mrow><mi>Q</mi><mi>F</mi></mrow></msub><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">D_{CQF} = x^\circ - \sum_i c_i = \alpha D_{QF}.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.9694em;vertical-align:-0.2861em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">D</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0278em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.13889em;">CQF</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.8074em;vertical-align:-0.0833em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7241em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">∘</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:2.3277em;vertical-align:-1.2777em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8723em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.2777em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.9694em;vertical-align:-0.2861em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">D</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0278em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.13889em;">QF</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mord">.</span></span></span></span></span></p>
<p>So, CQF has a smaller deficit than QF. It results in a better<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/fund-open-source/#fn5" id="fnref5">[5]</a></sup> allocation than private donations. However, CQF does not yield the efficient allocation unless <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>α</mi><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\alpha = 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>.</p>
<h2>Implementations</h2>
<p>Implementations of QF have not actually implemented QF or CQF. They have instead implemented the following rule which I call NQF:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msup><mover accent="true"><mi>x</mi><mo>~</mo></mover><mi>p</mi></msup><mo>=</mo><mrow><mo fence="true">[</mo><munder><mo>∑</mo><mi>i</mi></munder><msubsup><mi>c</mi><mi>i</mi><mi>p</mi></msubsup><mo fence="true">]</mo></mrow><mo>+</mo><mi>G</mi><mfrac><msup><mrow><mo fence="true">(</mo><munder><mo>∑</mo><mi>i</mi></munder><msqrt><msubsup><mi>c</mi><mi>i</mi><mi>p</mi></msubsup></msqrt><mo fence="true">)</mo></mrow><mn>2</mn></msup><mrow><munder><mo>∑</mo><mi>p</mi></munder><msup><mrow><mo fence="true">(</mo><munder><mo>∑</mo><mi>i</mi></munder><msqrt><msubsup><mi>c</mi><mi>i</mi><mi>p</mi></msubsup></msqrt><mo fence="true">)</mo></mrow><mn>2</mn></msup></mrow></mfrac></mrow><annotation encoding="application/x-tex">\tilde{x}^p = \left[ \sum_i c_i^p \right] + G \frac{\left( \sum_i \sqrt{c_i^p} \right)^2}{ \sum_p \left( \sum_i \sqrt{c_i^p} \right)^2}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7144em;"></span><span class="mord"><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6679em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal">x</span></span><span style="top:-3.35em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.2222em;"><span class="mord">~</span></span></span></span></span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7144em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">p</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:3.0277em;vertical-align:-1.2777em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size4">[</span></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.05em;"><span style="top:-1.8723em;margin-left:0em;"><span class="pstrut" style="height:3.05em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.05em;"><span class="pstrut" style="height:3.05em;"></span><span><span class="mop op-symbol large-op">∑</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.2777em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7823em;"><span style="top:-2.4231em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.1809em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">p</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2769em;"><span></span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size4">]</span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:4.2881em;vertical-align:-1.894em;"></span><span class="mord mathnormal">G</span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.394em;"><span style="top:-2.11em;"><span class="pstrut" style="height:3.354em;"></span><span class="mord"><span class="mop"><span class="mop op-symbol small-op" style="position:relative;top:0em;">∑</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.0017em;"><span style="top:-2.4003em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">p</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4358em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size2">(</span></span><span class="mop"><span class="mop op-symbol small-op" style="position:relative;top:0em;">∑</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.162em;"><span style="top:-2.4003em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2997em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord sqrt"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.9377em;"><span class="svg-align" style="top:-3.2em;"><span class="pstrut" style="height:3.2em;"></span><span class="mord" style="padding-left:1em;"><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7823em;"><span style="top:-2.4231em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.1809em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">p</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2769em;"><span></span></span></span></span></span></span></span></span><span 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M1001 80h400000v40h-400000z"></path></svg></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3023em;"><span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size2">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:1.354em;"><span style="top:-3.6029em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.894em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>G</mi></mrow><annotation encoding="application/x-tex">G</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span></span></span></span> is the size of an outside grant and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi></mrow><annotation encoding="application/x-tex">p</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">p</span></span></span></span> is an index for the open source project. A <a href="https://wtfisqf.com/">calculator for NQF</a> is available with <a href="https://github.com/anish-agnihotri/quadratic-funding">source code</a>. This formulation guarantees that the deficit of the mechanism is exactly <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>D</mi><mrow><mi>N</mi><mi>Q</mi><mi>F</mi></mrow></msub><mo>=</mo><mi>G</mi></mrow><annotation encoding="application/x-tex">D_{NQF} = G</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.9694em;vertical-align:-0.2861em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">D</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0278em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.13889em;">NQF</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span></span></span></span>. This is a desirable property because it ensures that the round never goes over budget and that all of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>G</mi></mrow><annotation encoding="application/x-tex">G</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span></span></span></span> is used. However, this model is not ideal. In the next section, I’ll show a better way.</p>
<p><strong>NQF lacks the desirable properties of QF and CQF.</strong> It not not efficient. It is a completely different mechanism.</p>
<p>The first thing to note is that a private good still gets a subsidy under NQF. Under VCG, QF, and CQF, any project with one contributor gets no subsidy. You can see in the equation above that this is not true for NQF because the subsidy for each project</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>G</mi><mfrac><msup><mrow><mo fence="true">(</mo><munder><mo>∑</mo><mi>i</mi></munder><msqrt><msubsup><mi>c</mi><mi>i</mi><mi>p</mi></msubsup></msqrt><mo fence="true">)</mo></mrow><mn>2</mn></msup><mrow><munder><mo>∑</mo><mi>p</mi></munder><msup><mrow><mo fence="true">(</mo><munder><mo>∑</mo><mi>i</mi></munder><msqrt><msubsup><mi>c</mi><mi>i</mi><mi>p</mi></msubsup></msqrt><mo fence="true">)</mo></mrow><mn>2</mn></msup></mrow></mfrac></mrow><annotation encoding="application/x-tex">G \frac{\left( \sum_i \sqrt{c_i^p} \right)^2}{ \sum_p \left( \sum_i \sqrt{c_i^p} \right)^2}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:4.2881em;vertical-align:-1.894em;"></span><span class="mord mathnormal">G</span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.394em;"><span style="top:-2.11em;"><span class="pstrut" style="height:3.354em;"></span><span class="mord"><span class="mop"><span class="mop op-symbol small-op" style="position:relative;top:0em;">∑</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.0017em;"><span style="top:-2.4003em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">p</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4358em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size2">(</span></span><span class="mop"><span class="mop op-symbol small-op" style="position:relative;top:0em;">∑</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.162em;"><span style="top:-2.4003em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2997em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord sqrt"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.9377em;"><span class="svg-align" style="top:-3.2em;"><span class="pstrut" style="height:3.2em;"></span><span class="mord" style="padding-left:1em;"><span class="mord"><span class="mord mathnormal">c</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7823em;"><span style="top:-2.4231em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.1809em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">p</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2769em;"><span></span></span></span></span></span></span></span></span><span style="top:-2.8977em;"><span class="pstrut" style="height:3.2em;"></span><span class="hide-tail" style="min-width:1.02em;height:1.28em;"><svg xmlns="http://www.w3.org/2000/svg" width="400em" height="1.28em" viewBox="0 0 400000 1296" preserveAspectRatio="xMinYMin slice"><path d="M263,681c0.7,0,18,39.7,52,119
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<p>is always positive. This means that any individual who can list a project can fraudulently profit from the mechanism.</p>
<p>The second thing to note about NQF is funds allocated to project <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi></mrow><annotation encoding="application/x-tex">p</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">p</span></span></span></span> are decreasing in the contributions to all other projects. For example, when you donate to WebPack, you are taking funds away from all other projects. This generates inefficiency and is a major deviation from QF and CQF.</p>
<p>NQF does not necessarily beat private contributions. In fact, we show an example where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>G</mi></mrow><annotation encoding="application/x-tex">G</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span></span></span></span> is wasted entirely.</p>
<p><strong>Example:</strong> Suppose there are two contributors and two projects. Contributor 1 likes both projects equally while Contributor 2 only likes Project 1. More concretely, assume</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msubsup><mi>v</mi><mn>1</mn><mn>1</mn></msubsup><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><msubsup><mi>v</mi><mn>1</mn><mn>2</mn></msubsup><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><msubsup><mi>v</mi><mn>2</mn><mn>1</mn></msubsup><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><mn>2</mn><msqrt><mi>x</mi></msqrt></mrow><annotation encoding="application/x-tex">v_1^1(x) = v_1^2(x) = v_2^1(x) = 2 \sqrt{x}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.1141em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8641em;"><span style="top:-2.453em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1141em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8641em;"><span style="top:-2.453em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1141em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8641em;"><span style="top:-2.453em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.04em;vertical-align:-0.1908em;"></span><span class="mord">2</span><span class="mord sqrt"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8492em;"><span class="svg-align" style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord" style="padding-left:0.833em;"><span class="mord mathnormal">x</span></span></span><span style="top:-2.8092em;"><span class="pstrut" style="height:3em;"></span><span class="hide-tail" style="min-width:0.853em;height:1.08em;"><svg xmlns="http://www.w3.org/2000/svg" width="400em" height="1.08em" viewBox="0 0 400000 1080" preserveAspectRatio="xMinYMin slice"><path d="M95,702
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M834 80h400000v40h-400000z"></path></svg></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.1908em;"><span></span></span></span></span></span></span></span></span></span></p>
<p>while <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mi>v</mi><mn>2</mn><mn>2</mn></msubsup><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">v_2^2(x) = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.0641em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-2.4519em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>. Contributor 1 has no reason to contribute to Project 1 through the mechanism. He will give only to Project 2 such that the grant is split evenly between the two projects. This is despite the fact that Project 1 is more valuable to society. The quadratic nature of this mechanism actually exacerbates the problem because even a small contribution by Player 1 to Project 1 will divert a large amount of funding away from Project 2. Allocations can be found in the table below.</p>
<table class="center">
<thead>
<tr>
<th style="text-align:left"></th>
<th style="text-align:center">NQF (G = 1)<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/fund-open-source/#fn6" id="fnref6">[6]</a></sup></th>
<th style="text-align:center">Return Grant (G = 0)</th>
</tr>
</thead>
<tbody>
<tr>
<td style="text-align:left">Player 1</td>
<td style="text-align:center">(0, 1/2)</td>
<td style="text-align:center">(0, 1)</td>
</tr>
<tr>
<td style="text-align:left">Player 2</td>
<td style="text-align:center">(1/2, 0)</td>
<td style="text-align:center">(1, 0)</td>
</tr>
<tr>
<td style="text-align:left">Grant</td>
<td style="text-align:center">(1/2, 1/2)</td>
<td style="text-align:center">(0, 0)</td>
</tr>
<tr>
<td style="text-align:left"><strong>Total</strong></td>
<td style="text-align:center"><strong>(1, 1)</strong></td>
<td style="text-align:center"><strong>(1, 1)</strong></td>
</tr>
<tr>
<td style="text-align:left">Optimal</td>
<td style="text-align:center">(4, 1)</td>
<td style="text-align:center">(4, 1)</td>
</tr>
</tbody>
</table>
<p>The above table shows the contributions to Project 1 and Project 2 by each player and the grants. As you can see, the total contributions are the same between NQF and private contributions. So, in our example, NQF does not outperform private contributions even though a grant has been collected. Of course, both are outperformed by matching contributions or performing QF with any <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>α</mi><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\alpha > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.</p>
<p>This points to a general issue with this mechanism. People who like both popular and unpopular projects have an incentive to divert resources to the unpopular ones. This is a classic voting issue and is exactly the sort of behavior that quadratic voting mechanisms were designed to prevent.</p>
<h2>A better way</h2>
<p>NQF has the nice property that the deficit is exactly equal to your grant funding. So you can never generate more deficit than you have funding for. However, it lacks all other nice properties of QF or CQF. It does not result in an approximately efficient allocation and it can be defrauded by a single agent. However, it is possible to get the one advantage of NQF (<span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>D</mi><mo>=</mo><mi>G</mi></mrow><annotation encoding="application/x-tex">D = G</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">D</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span></span></span></span>) without losing any of these properties. You just have to stop the mechanism when <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>D</mi><mo>=</mo><mi>G</mi></mrow><annotation encoding="application/x-tex">D = G</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">D</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span></span></span></span>.</p>
<p>That is:</p>
<ol>
<li>Run QF or CQF with your preferred choice of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>α</mi></mrow><annotation encoding="application/x-tex">\alpha</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span></span></span></span>.</li>
<li>Compute your deficit <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>D</mi></mrow><annotation encoding="application/x-tex">D</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">D</span></span></span></span> after every donation.</li>
<li>End the donation matching once <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>D</mi><mo>=</mo><mi>G</mi></mrow><annotation encoding="application/x-tex">D = G</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">D</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span></span></span></span>.</li>
</ol>
<p>This last step could be achieved by cutting off donations completely or by putting a “donation matching is currently disabled” message on the screens of potential donors. The choice of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>α</mi></mrow><annotation encoding="application/x-tex">\alpha</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.0037em;">α</span></span></span></span> would determine how long you can run the match.</p>
<hr>
<hr class="footnotes-sep">
<section class="footnotes">
<ol class="footnotes-list">
<li id="fn1" class="footnote-item"><p>These assumptions are from the QF/LR papers. VCG doesn’t need all of these assumptions. <a href="https://www.matthewthom.as/blog/fund-open-source/#fnref1" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn2" class="footnote-item"><p>You can subtract any <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>h</mi><mi>i</mi></msub><mo stretchy="false">(</mo><msub><mi>v</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">h_i(v_{-i})</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">h</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mclose">)</span></span></span></span> where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>v</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo>=</mo><mo stretchy="false">(</mo><msub><mi>v</mi><mn>1</mn></msub><mo separator="true">,</mo><mo>…</mo><mo separator="true">,</mo><msub><mi>v</mi><mrow><mi>i</mi><mo>−</mo><mn>1</mn></mrow></msub><mo separator="true">,</mo><msub><mi>v</mi><mrow><mi>i</mi><mo>+</mo><mn>1</mn></mrow></msub><mo separator="true">,</mo><mo>…</mo><mo separator="true">,</mo><msub><mi>v</mi><mi>n</mi></msub><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">v_{-i} = (v_1, \dots, v_{i-1}, v_{i+1}, \dots, v_n)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6389em;vertical-align:-0.2083em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner">…</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">i</span><span class="mbin mtight">−</span><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">i</span><span class="mbin mtight">+</span><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner">…</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.1514em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">n</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span></span></span></span>. <a href="https://www.matthewthom.as/blog/fund-open-source/#fnref2" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn3" class="footnote-item"><p>This ideal function is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mrow><mi>max</mi><mo></mo></mrow><mi>x</mi></msub><mrow><mo fence="true">[</mo><msub><mo>∑</mo><mrow><mi>j</mi><mo mathvariant="normal">≠</mo><mi>i</mi></mrow></msub><msub><mi>v</mi><mi>j</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo fence="true">]</mo></mrow><mo>−</mo><mi>x</mi></mrow><annotation encoding="application/x-tex">\max_x \left[ \sum_{j \neq i} v_j( x ) \right] - x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.8em;vertical-align:-0.65em;"></span><span class="mop"><span class="mop">max</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.1514em;"><span style="top:-2.55em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">x</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size2">[</span></span><span class="mop"><span class="mop op-symbol small-op" style="position:relative;top:0em;">∑</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.1864em;"><span style="top:-2.4003em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.05724em;">j</span><span class="mrel mtight"><span class="mrel mtight"><span class="mord vbox mtight"><span class="thinbox mtight"><span class="rlap mtight"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="inner"><span class="mord mtight"><span class="mrel mtight"></span></span></span><span class="fix"></span></span></span></span></span><span class="mrel mtight">=</span></span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4358em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.05724em;">j</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size2">]</span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal">x</span></span></span></span>. <a href="https://www.matthewthom.as/blog/fund-open-source/#fnref3" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn4" class="footnote-item"><p>As the paper points out, efficiency is lost when people consider how their choices affect their taxes. Though this goes away as the number of participants becomes large. It’s hard to see this as an issue if the mechanism played out on a national scale. <a href="https://www.matthewthom.as/blog/fund-open-source/#fnref4" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn5" class="footnote-item"><p>‘Better’ in that it is closer to the efficient allocation <a href="https://www.matthewthom.as/blog/fund-open-source/#fnref5" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn6" class="footnote-item"><p>The assumption that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>G</mi><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">G=1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">G</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> isn’t terribly important. It does not affect total contributions. Naturally, it’s possible to get above <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">(</mo><mn>1</mn><mo separator="true">,</mo><mn>1</mn><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">(1,1)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">1</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span><span class="mclose">)</span></span></span></span> when <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>G</mi><mo>></mo><mn>2</mn></mrow><annotation encoding="application/x-tex">G > 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7224em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">G</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>. However, contributors give nothing in this case. So, it is not terribly interesting. <a href="https://www.matthewthom.as/blog/fund-open-source/#fnref6" class="footnote-backref">↩︎</a></p>
</li>
</ol>
</section>
List of Econ Blogs
2021-03-12T00:00:00Z
https://www.matthewthom.as/blog/list-of-econ-blogs/
<p>This is a list I compiled of other blogs about Economics. If you would like to add or get added to this list, contact me, comment, or just submit a request to <a href="https://github.com/mwt/matthewthom.as/edit/master/_data/econ-blogs.yml">edit the file that generates this list</a>.</p>
<p>—</p><div class="projects"><p></p>
<section class="list"><div class="item">
<h3>
<a class="title" href="https://afinetheorem.wordpress.com/">
A Fine Theorem</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://aheblog.com/">
Academic Health Economists' Blog</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.alt-m.org/">
Alt-M</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://angrybearblog.com/">
Angry Bear</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://antoniofatas.blogspot.com/">
Antonio Fatas</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.arnoldkling.com/blog/">
Arnold Kling</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://bankunderground.co.uk/">
Bank Underground</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://braddelong.substack.com/">
Brad DeLong</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://cafehayek.com/">
Cafe Hayek</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.calculatedriskblog.com/">
Calculated Risk</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://blogs.wellesley.edu/jjoyce/">
Capital Ebbs and Flows</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://carolabinder.blogspot.com/">
Carola Binder</a>
</h3></div><div class="item">
<h3>
<a class="title" href="http://causality.cs.ucla.edu/blog/">
Causal Analysis in Theory and Practice</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://causalinf.substack.com/">
Causal Inference: the Remix</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.moneyandbanking.com/commentary/">
Cecchetti and Schoenholtz</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://chrisblattman.com/">
Chris Blattman</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://austrianeconomists.typepad.com/">
Coordination Problem</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://pro.creditwritedowns.com/">
Credit Writedowns</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://croakingcassandra.com/">
Croaking Cassandra</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://crookedtimber.org/">
Crooked Timber</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://thedangerouseconomist.blogspot.com/">
Dangerous Economist</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://dlm-econometrics.blogspot.com/">
Dan Millimet</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://rodrik.typepad.com/">
Dani Rodrik</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://davegiles.blogspot.com/">
Dave Giles</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.cepr.net/blog/dean-bakers-beat-the-press/">
Dean Baker</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://digitopoly.org/">
Digitopoly</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://econbrowser.com/">
Econbrowser</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.econlib.org/econlog/">
EconLog</a>
</h3></div><div class="item">
<h3>
<a class="title" href="http://www.economicprincipals.com/">
Economic Principals</a>
</h3></div><div class="item">
<h3>
<a class="title" href="http://www.economicsuk.com/blog/">
Economics UK</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://economistsview.typepad.com/">
Economist's View</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://econospeak.blogspot.com/">
EconoSpeak</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://greeneconomics.blogspot.com/">
Env and Urban Economics</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.env-econ.net/">
Environmental Econ</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://freakonomics.com/">
Freakonomics</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.fresheconomicthinking.com/">
Fresh Economic Thinking</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://gregmankiw.blogspot.com/">
Greg Mankiw</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://growthecon.wordpress.com/">
Growth Economics</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://blogs.imf.org/">
IMFBlog</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.interfluidity.com/">
Interfluidity</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://jaredbernsteinblog.com/">
Jared Bernstein</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://jaysonlusk.com/">
Jayson Lusk</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.johnquiggin.com/">
John Quiggin</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://economicsone.com/">
John Taylor</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://lanekenworthy.net/blog/">
Lane Kenworthy</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://libertystreeteconomics.newyorkfed.org/">
Liberty Street</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://macromarketmusings.blogspot.com/">
Macro Musings</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.frbatlanta.org/blogs/macroblog/">
macroblog</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://andolfatto.blogspot.com/">
MacroMania</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://magic-maths-money.blogspot.com/">
Magic, maths, money</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://mainlymacro.blogspot.com/">
mainly macro</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://marcfbellemare.com/wordpress/">
Marc Bellemare</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://marginalrevolution.com/">
Marginal Revolution</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.matthewthom.as/blog/">
Matthew W. Thomas</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://milescorak.com/">
Miles Corak</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://jpkoning.blogspot.com/">
Moneyness</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.nakedcapitalism.com/">
Naked Capitalism</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://nepdge.wordpress.com/">
NEP-DGE Blog</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://fxdiebold.blogspot.com/">
No Hesitations</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://noahpinion.substack.com/">
Noahpinion</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.cbpp.org/blog">
Off the Charts</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://owenzidar.wordpress.com/">
Owen Zidar</a>
</h3></div><div class="item">
<h3>
<a class="title" href="http://www.petergordonsblog.com/">
Peter Gordon's Blog</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.samefacts.com/">
Reality-Based Community</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://real-estate-and-urban.blogspot.com/">
Richard Green</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://robertreich.org/">
Robert Reich</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://rjwaldmann.blogspot.com/">
Robert Waldmann</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.rogerfarmer.com/rogerfarmerblog/">
Roger Farmer</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://statmodeling.stat.columbia.edu/">
Stat Model and Social Sci</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://stochastictrend.blogspot.com/">
Stochastic Trend</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://stumblingandmumbling.typepad.com/">
Stumbling and Mumbling</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://blog.supplysideliberal.com/">
Supply-Side Liberal</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://taxfoundation.org/blog">
Tax Policy Blog</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://blogs.berkeley.edu/category/economics/">
The Berkeley Econ Blog</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://ritholtz.com/">
The Big Picture</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://theincidentaleconomist.com/">
The Incidental Economist</a>
</h3></div><div class="item">
<h3>
<a class="title" href="http://www.irisheconomy.ie/">
The Irish Economy</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://www.themoneyillusion.com/">
The Money Illusion</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://theoryclass.wordpress.com/">
Theory Class</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://thomaspalley.com/">
Thomas Palley</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://gulzar05.blogspot.com/">
Urbanomics</a>
</h3></div><div class="item">
<h3>
<a class="title" href="https://worthwhile.typepad.com/">
Worthwhile Canad Init</a>
</h3></div></section>
</div>
Econ Ipsum Now Available in TeX
2021-03-15T00:00:00Z
https://www.matthewthom.as/blog/econ-ipsum-tex/
<p>About two years ago, <a href="https://mariabetto.com/">Maria Betto</a> and I made <a href="https://ipsum.mwt.me/">Econ Ipsum</a>, a Lorem Ipsum generator that uses words from Econometrica abstracts to produce Economic sounding nonsense. We never put any sort of tracking or analytics on the page. So, I don’t know how many people use it. However, I can tell from the number of api calls that it is more than originally expected.<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/econ-ipsum-tex/#fn1" id="fnref1">[1]</a></sup></p>
<p>One long running joke on the page is that the randomized articles have zero citations and are “not forthcoming”. That is, we remind that the random text is not a reference for any other article and is not scheduled for publication in any journal. These facts were intended to be self-evident. So, I was surprised when a student contacted me to ask if he could use some random paragraphs in a TeX package he was working on.</p>
<p>Naturally, I was ecstatic that someone liked Econ Ipsum enough to make a spinoff. So, I’m happy to announce that you can now use Econ Ipsum paragraphs in TeX via the <a href="https://ctan.org/pkg/econlipsum">econlipsum</a> package by Jack Coleman. So, Econ Ipsum’s citation counter – intended to remain forever at zero – has now advanced to one.</p>
<p class="text-center"><picture><source type="image/png" srcset="https://www.matthewthom.as/assets/images/kohtNvhYYW-760.png 760w"><img alt="Econ Ipsum with one citation" loading="lazy" decoding="async" src="https://www.matthewthom.as/assets/images/kohtNvhYYW-760.jpeg" width="760" height="441"></picture></p>
<hr>
<hr class="footnotes-sep">
<section class="footnotes">
<ol class="footnotes-list">
<li id="fn1" class="footnote-item"><p>The number of api executions is the maximum number of paragraphs requested by a single person divided by 100 (and rounded up). Each day (typically) has between 3 and 30 executions. On one day, there were 184 executions – which means that one person generated 18,400 paragraphs. <a href="https://www.matthewthom.as/blog/econ-ipsum-tex/#fnref1" class="footnote-backref">↩︎</a></p>
</li>
</ol>
</section>
Nonlinear War of Attrition with Complete Information
2021-03-22T00:00:00Z
https://www.matthewthom.as/blog/war-of-attrition-complete-information/
<p>These notes are about nonlinear war of attrition models with two players. The formulation we consider is a simplified version of <a href="https://econpapers.repec.org/RePEc:ier:iecrev:v:29:y:1988:i:4:p:663-80">Hendricks, Weiss, and Wilson (1988)</a>. These models are popular for modeling conflict that occurs in continuous time including wars, filibusters, bribes, and competition for standards and monopolies.</p>
<h2>Basics</h2>
<p>The war of attrition is a second price all-pay auction. That is, an auction where players pay a function of the second highest bid. The story is that two players enter into a battle royal to win some reward. Each moment that they fight, they must pay some cost. Each player chooses a secret time when they will exit the fight and forfeit the prize.</p>
<p>Because the last player wins as soon his opponent exits, the winner only fights until her opponent’s exit time. So, both players only face the cost of the lower exit time.</p>
<h2>Model</h2>
<p>There are two players, Player 1 and Player 2. Suppose player <em>i</em> exits at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>t</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">t_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7651em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> and the other player exits at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub></mrow><annotation encoding="application/x-tex">t_{-i}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8234em;vertical-align:-0.2083em;"></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span></span></span></span>. Then, the payoff of player <em>i</em> is defined by:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>U</mi><mi>i</mi></msub><mo stretchy="false">(</mo><msub><mi>t</mi><mi>i</mi></msub><mo separator="true">;</mo><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><msub><mi>t</mi><mi>i</mi></msub><mo stretchy="false">)</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext> if </mtext><msub><mi>t</mi><mi>i</mi></msub><mo><</mo><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><msub><mi>s</mi><mi>i</mi></msub><mo stretchy="false">(</mo><msub><mi>t</mi><mi>i</mi></msub><mo stretchy="false">)</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext> if </mtext><msub><mi>t</mi><mi>i</mi></msub><mo>=</mo><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">)</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext> if </mtext><msub><mi>t</mi><mi>i</mi></msub><mo>></mo><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex">U_i( t_i ; t_{-i} ) =
\begin{cases}
\ell_i(t_i) &\text{ if } t_i < t_{-i} \\
s_i(t_i) &\text{ if } t_i = t_{-i} \\
f_i(t_{-i}) &\text{ if } t_i > t_{-i}
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">;</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:4.32em;vertical-align:-1.91em;"></span><span class="minner"><span class="mopen"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.35em;"><span style="top:-2.2em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎩</span></span></span><span style="top:-2.192em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-3.15em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎨</span></span></span><span style="top:-4.292em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-4.6em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎧</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.85em;"><span></span></span></span></span></span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord"> if </span></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord"> if </span></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord"> if </span></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">\ell_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8444em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is the payoff of losing, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">s_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is the payoff of a tie, and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>f</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">f_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is the payoff of the winner. Note that the two players can have entirely different payoffs. In the most common formulation, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>=</mo><mo>−</mo><mi>t</mi></mrow><annotation encoding="application/x-tex">\ell_i(t) = -t</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6984em;vertical-align:-0.0833em;"></span><span class="mord">−</span><span class="mord mathnormal">t</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>=</mo><msub><mi>V</mi><mi>i</mi></msub><mo>−</mo><mi>t</mi></mrow><annotation encoding="application/x-tex">f_i(t) = V_i - t</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.8333em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.2222em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.6151em;"></span><span class="mord mathnormal">t</span></span></span></span>.</p>
<p>We make one regularity assumption and another assumption which characterizes the war of attrition.</p>
<p><strong>Assumption 1:</strong> The function <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">f_i(t)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span></span></span></span> is continuous and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">\ell_i(t)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span></span></span></span> is continuously differentiable.</p>
<p><strong>Assumption 2:</strong> Players like to win and war is costly. Specifically,</p>
<ol>
<li><em>Winning is better than losing:</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>></mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">f_i(t) > \ell_i(t)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span></span></span></span> for all <em>t</em>.</li>
<li><em>Winning is better than tieing:</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>></mo><msub><mi>s</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">f_i(t) > s_i(t)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span></span></span></span> for all <em>t</em>.</li>
<li><em>War is costly when losing:</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mi mathvariant="normal">ℓ</mi><mi>i</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msubsup><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo><</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\ell'_i(t) < 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.0106em;vertical-align:-0.2587em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7519em;"><span style="top:-2.4413em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2587em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.</li>
<li><em>Costs are relevant:</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mo>∫</mo><mn>0</mn><mi mathvariant="normal">∞</mi></msubsup><mfrac><mrow><mo>−</mo><msubsup><mi mathvariant="normal">ℓ</mi><mi>i</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msubsup><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo><mo>−</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow></mfrac><mi>d</mi><mi>z</mi><mo>=</mo><mi mathvariant="normal">∞</mi></mrow><annotation encoding="application/x-tex">\int_0^\infty \frac{-\ell'_i(z)}{f_i(z) - \ell_i(z)} dz = \infty</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.6097em;vertical-align:-0.52em;"></span><span class="mop"><span class="mop op-symbol small-op" style="margin-right:0.19445em;position:relative;top:-0.0006em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8593em;"><span style="top:-2.3442em;margin-left:-0.1945em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.2579em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">∞</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3558em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0897em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3281em;"><span style="top:-2.357em;margin-left:-0.1076em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.143em;"><span></span></span></span></span></span></span><span class="mopen mtight">(</span><span class="mord mathnormal mtight" style="margin-right:0.04398em;">z</span><span class="mclose mtight">)</span><span class="mbin mtight">−</span><span class="mord mtight"><span class="mord mtight">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3281em;"><span style="top:-2.357em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.143em;"><span></span></span></span></span></span></span><span class="mopen mtight">(</span><span class="mord mathnormal mtight" style="margin-right:0.04398em;">z</span><span class="mclose mtight">)</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.5102em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mtight"><span class="mord mtight">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8278em;"><span style="top:-2.214em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.286em;"><span></span></span></span></span></span></span><span class="mopen mtight">(</span><span class="mord mathnormal mtight" style="margin-right:0.04398em;">z</span><span class="mclose mtight">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.52em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord">∞</span></span></span></span>.</li>
</ol>
<p>Without loss of generality, we will say that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\ell_i(0) = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>. The second assumption guarantees that ties occur with probability zero in equilibrium. So, I will not mention them again. The last point of Assumption 2 prevents pathological behavior around infinity. Without this, it is possible that the players would never exit. It can be interpreted as a guarantee that the benefit of winning is not so large relative to the cost of the war.</p>
<h2>Pure strategy Equilibria</h2>
<p>If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mrow><mi>lim</mi><mo></mo></mrow><mrow><mi>t</mi><mo>→</mo><mi mathvariant="normal">∞</mi></mrow></msub><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo><</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mn>0</mn><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">\lim_{t \to \infty} f_i(t) < \ell_i(0)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mop"><span class="mop">lim</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.2806em;"><span style="top:-2.55em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">t</span><span class="mrel mtight">→</span><span class="mord mtight">∞</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord">0</span><span class="mclose">)</span></span></span></span>, there are asymmetric pure strategy Nash equilibria where one player, <em>i</em>, chooses a very large exit time <em>t</em> such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>w</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo><</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">w_{-i}(t) < 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02691em;">w</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0269em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>. The other player best responds by playing zero because fighting enough to win is not worthwhile. Because the winner’s payoff does not depend on her own score, she is indifferent between all actions except zero. So, this is a Nash equilibrium.</p>
<h2>Mixed strategy equilibria</h2>
<p>In addition to the pure strategy equilibria, there is one Nash equilibrium in mixed strategies. The equilibrium will have full support over the real line. This is established in several steps.</p>
<ol>
<li><em>If one player has a gap in their support, their opponent must have the same gap.</em> Otherwise, the opponent would move density from the gap to just before it.</li>
<li><em>There are no gaps in either support.</em> Otherwise, each player could do better by moving mass from the end of the gap to the beginning.</li>
<li><em>There are no atoms except at zero.</em> Otherwise, the opponent would move mass from slightly below the atom to slightly above the atom. This would create a gap.</li>
<li><em>At most one player has an atom at zero.</em> Otherwise, one player would prefer to move their atom slightly up.</li>
</ol>
<p>We will see from the construction of the equilibrium that no player can have an atom and that the support cannot be bounded. However, these four points are enough to get us started.</p>
<p>In order for the player to be willing to mix, they must be indifferent between all points on the support. So, the following indifference condition applies:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>P</mi><mo stretchy="false">(</mo><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo><</mo><msub><mi>t</mi><mi>i</mi></msub><mo stretchy="false">)</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">)</mo><mi mathvariant="normal">∣</mi><msub><mi>t</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo><</mo><msub><mi>t</mi><mi>i</mi></msub><mo stretchy="false">]</mo><mo>+</mo><mo stretchy="false">(</mo><mn>1</mn><mo>−</mo><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo stretchy="false">)</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>=</mo><msub><mi>u</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">P(t_{-i} < t_i) E[ f_i(t_{-i}) \vert t_{-i} < t_i ] + (1 - G_{-i}(t)) \ell_i(t) = u_i
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.13889em;">P</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mord">∣</span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">t</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">))</span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">u</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>u</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">u_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">u</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is the player’s (constant) payoff. This is the same as</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msubsup><mo>∫</mo><mn>0</mn><mi>t</mi></msubsup><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mi>d</mi><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>+</mo><mo stretchy="false">(</mo><mn>1</mn><mo>−</mo><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo stretchy="false">)</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>=</mo><msub><mi>u</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">\int_0^t f_i(x) dG_{-i}(x) + (1 - G_{-i}(t)) \ell_i(t) = u_i
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.4554em;vertical-align:-0.9119em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.5435em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">t</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">))</span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">u</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub></mrow><annotation encoding="application/x-tex">G_{-i}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8917em;vertical-align:-0.2083em;"></span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span></span></span></span> is the equilibrium strategy distribution of the opponent. We want to solve for <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub></mrow><annotation encoding="application/x-tex">G_{-i}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8917em;vertical-align:-0.2083em;"></span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span></span></span></span>. If we take derivatives of both sides with respect to <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>t</mi></mrow><annotation encoding="application/x-tex">t</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6151em;"></span><span class="mord mathnormal">t</span></span></span></span>, we get</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><msub><mi>g</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>+</mo><mo stretchy="false">(</mo><mn>1</mn><mo>−</mo><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo stretchy="false">)</mo><msubsup><mi mathvariant="normal">ℓ</mi><mi>i</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msubsup><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>−</mo><msub><mi>g</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">f_i(x) g_{-i}(x) + (1 - G_{-i}(t)) \ell'_i(t) - g_{-i}(t) \ell_i(t) = 0
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1.0519em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">))</span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span></span></p>
<p>which simplifies to the following differential equation</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mo>−</mo><msubsup><mi mathvariant="normal">ℓ</mi><mi>i</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msubsup><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">(</mo><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>−</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo fence="true">)</mo></mrow><mfrac><mrow><msub><mi>g</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo></mrow><mrow><mn>1</mn><mo>−</mo><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo></mrow></mfrac><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">- \ell'_i(t) = \left(f_i(t) - \ell_i(t) \right) \frac{g_{-i}(t)}{1 - G_{-i}(t)}.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.0519em;vertical-align:-0.25em;"></span><span class="mord">−</span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8019em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.363em;vertical-align:-0.936em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mclose delimcenter" style="top:0em;">)</span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord">.</span></span></span></span></span></p>
<p>This equation ensures that the marginal cost of participating in the war of attrition is equal to the prize value times the rate that your opponent exits (hazard rate). So, we are equating marginal cost with marginal benefit.</p>
<p>The differential equation has a known solution:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>=</mo><mn>1</mn><mo>−</mo><mi>exp</mi><mo></mo><mrow><mo fence="true">(</mo><msubsup><mo>∫</mo><mn>0</mn><mi>t</mi></msubsup><mfrac><mrow><msubsup><mi mathvariant="normal">ℓ</mi><mi>i</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msubsup><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo><mo>−</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow></mfrac><mi>d</mi><mi>z</mi><mo fence="true">)</mo></mrow><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">G_{-i}(t) = 1 - \exp \left( \int _0^t \frac{ \ell'_i(z) }{ f_i(z) - \ell_i(z) } dz \right).
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7278em;vertical-align:-0.0833em;"></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:2.4935em;vertical-align:-0.95em;"></span><span class="mop">exp</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.5435em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">t</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4289em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7519em;"><span style="top:-2.4413em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2587em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">.</span></span></span></span></span></p>
<p>One might be concerned that the above expression may not satisfy the properties of a distribution function. For example, it may be decreasing or <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mrow><mi>lim</mi><mo></mo></mrow><mrow><mi>t</mi><mo>→</mo><mi mathvariant="normal">∞</mi></mrow></msub><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo mathvariant="normal">≠</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\lim_{t \to \infty} G_{-i}(t) \neq 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mop"><span class="mop">lim</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.2806em;"><span style="top:-2.55em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">t</span><span class="mrel mtight">→</span><span class="mord mtight">∞</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><span class="mrel"><span class="mord vbox"><span class="thinbox"><span class="rlap"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="inner"><span class="mord"><span class="mrel"></span></span></span><span class="fix"></span></span></span></span></span><span class="mrel">=</span></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>. This is not the case. The function is strictly increasing because the term inside the integral is negative. Assumption 2.4 guarantees that the distribution approaches one. However, it never reaches one at any time. So, the support is unbounded. Another way to see this is to note that the survival function is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>S</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo><mo>=</mo><mi>exp</mi><mo></mo><mrow><mo fence="true">(</mo><msubsup><mo>∫</mo><mn>0</mn><mi>t</mi></msubsup><mfrac><mrow><msubsup><mi mathvariant="normal">ℓ</mi><mi>i</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msubsup><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo><mo>−</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow></mfrac><mi>d</mi><mi>z</mi><mo fence="true">)</mo></mrow><mo>></mo><mn>0.</mn></mrow><annotation encoding="application/x-tex">S_{-i}(t) = \exp \left( \int _0^t \frac{ \ell'_i(z) }{ f_i(z) - \ell_i(z) } dz \right) > 0.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.05764em;">S</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.0576em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.4935em;vertical-align:-0.95em;"></span><span class="mop">exp</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.5435em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">t</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4289em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7519em;"><span style="top:-2.4413em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2587em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0.</span></span></span></span></span></p>
<p>The solution is somewhat difficult to work with. So, in most applications, the prize is taken to be fixed.</p>
<h3>Assuming fixed prizes</h3>
<p>If we assume <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo><mo>=</mo><msub><mi>V</mi><mi>i</mi></msub><mo>+</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>y</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">f_i(z) = V_i + \ell_i(y)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.8333em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.2222em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span></span></span></span>, where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>V</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">V_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8333em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.2222em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is a constant prize, then</p>
<p>So, the strategy reduces to</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable rowspacing="0.25em" columnalign="right left" columnspacing="0em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><msub><mi>G</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mn>1</mn><mo>−</mo><mi>exp</mi><mo></mo><mrow><mo fence="true">(</mo><msubsup><mo>∫</mo><mn>0</mn><mi>t</mi></msubsup><mfrac><mrow><msubsup><mi mathvariant="normal">ℓ</mi><mi>i</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msubsup><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow><mrow><msub><mi>f</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo><mo>−</mo><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow></mfrac><mi>d</mi><mi>z</mi><mo fence="true">)</mo></mrow></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mn>1</mn><mo>−</mo><mi>exp</mi><mo></mo><mrow><mo fence="true">(</mo><msubsup><mo>∫</mo><mn>0</mn><mi>t</mi></msubsup><mfrac><mrow><msubsup><mi mathvariant="normal">ℓ</mi><mi>i</mi><mo mathvariant="normal" lspace="0em" rspace="0em">′</mo></msubsup><mo stretchy="false">(</mo><mi>z</mi><mo stretchy="false">)</mo></mrow><msub><mi>V</mi><mi>i</mi></msub></mfrac><mi>d</mi><mi>z</mi><mo fence="true">)</mo></mrow></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mn>1</mn><mo>−</mo><mi>exp</mi><mo></mo><mrow><mo fence="true">(</mo><mfrac><mrow><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>t</mi><mo stretchy="false">)</mo></mrow><msub><mi>V</mi><mi>i</mi></msub></mfrac><mo fence="true">)</mo></mrow><mi mathvariant="normal">.</mi></mrow></mstyle></mtd></mtr></mtable><annotation encoding="application/x-tex">\begin{aligned}
G_{-i}(t) &= 1 - \exp \left( \int _0^t \frac{ \ell'_i(z) }{ f_i(z) - \ell_i(z) } dz \right) \\
&= 1 - \exp \left( \int _0^t \frac{ \ell'_i(z) }{ V_i } dz \right) \\
&= 1 - \exp \left( \frac{ \ell_i(t) }{ V_i } \right).
\end{aligned}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:8.287em;vertical-align:-3.8935em;"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:4.3935em;"><span style="top:-6.3935em;"><span class="pstrut" style="height:3.5435em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">G</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span></span></span><span style="top:-3.6em;"><span class="pstrut" style="height:3.5435em;"></span><span class="mord"></span></span><span style="top:-0.9em;"><span class="pstrut" style="height:3.5435em;"></span><span class="mord"></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.8935em;"><span></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:4.3935em;"><span style="top:-6.3935em;"><span class="pstrut" style="height:3.5435em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mop">exp</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.5435em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">t</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4289em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.1076em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7519em;"><span style="top:-2.4413em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2587em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span></span></span><span style="top:-3.6em;"><span class="pstrut" style="height:3.5435em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mop">exp</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.5435em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">t</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4289em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.2222em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7519em;"><span style="top:-2.4413em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">′</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2587em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.836em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.04398em;">z</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span></span></span><span style="top:-0.9em;"><span class="pstrut" style="height:3.5435em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mop">exp</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:-0.2222em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">t</span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.836em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">.</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.8935em;"><span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>This equation is about as simple as the equilibrium of the linear war of attrition (where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><mo>−</mo><mi>x</mi></mrow><annotation encoding="application/x-tex">\ell_i(x) = -x</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6667em;vertical-align:-0.0833em;"></span><span class="mord">−</span><span class="mord mathnormal">x</span></span></span></span>). So, it is pretty popular. You can try other assumptions in the general equation to to get other expressions. For example, the equilibrium where players only pay a fraction of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi mathvariant="normal">ℓ</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">\ell_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8444em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord">ℓ</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> when they win is also relatively simple.</p>
Tullock Lottery Contests with Direct and Covert Discrimination
2021-04-15T00:00:00Z
https://www.matthewthom.as/blog/covert-discrimination-tullock/
<p>These notes summarize concepts introduced in <a href="https://econpapers.repec.org/RePEc:kap:pubcho:v:98:y:1999:i:3-4:p:415-30">Nti (1999)</a>, <a href="https://econpapers.repec.org/RePEc:kap:pubcho:v:112:y:2002:i:3-4:p:351-71">Fang (2002)</a>, <a href="https://econpapers.repec.org/RePEc:eee:poleco:v:20:y:2004:i:4:p:1059-1066">Nti (2004)</a>, <a href="https://econpapers.repec.org/RePEc:bla:ecopol:v:25:y:2013:i:1:p:48-60">Epstein et al (2013)</a>, and <a href="https://econpapers.repec.org/RePEc:eee:ecolet:v:157:y:2017:i:c:p:167-170">Ewerhart (2017a)</a> about revenue maximization in Tullock lottery contests.</p>
<h2>Introduction</h2>
<p>Contests are models of conflict where risk neutral players exert costly effort to win a prize. A <em>lottery contest</em> is any contest where there is not a deterministic relationship between effort and victory. For example, scores could be measured incorrectly or there could be some randomness in the relationship between effort and the final scores. Alternatively, you can interpret lottery contests as giving each player a slice of a prize. For example, a 5% probability of receiving the prize is the same as receiving 5% of the prize with certainty.</p>
<p>The most popular lottery contest is the Tullock contest.<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fn1" id="fnref1">[1]</a></sup> We discuss ways to increase competitiveness in Tullock contests by discriminating against the stronger player. Handicaps in sporting events are a real world example of such discrimination. The purpose of a handicap is to make a match more even so that both teams/players exert more effort.</p>
<h2>Model</h2>
<p>Suppose that the prize of contest is worth one to both players. So, the two players have the same value. However, their scores have different costs. In particular, we will say that the score is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo>></mo><mn>1</mn></mrow><annotation encoding="application/x-tex">k > 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> times more costly for Player 2 than for Player 1.<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fn2" id="fnref2">[2]</a></sup> You can interpret this as saying that Player 1 is more skilled. So, it takes less effort for her to produce a high score.</p>
<p>The probability of Player 1 winning the prize in a Tullock contest when she chooses score <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>1</mn></msub></mrow><annotation encoding="application/x-tex">s_1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> and her opponent chooses score <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>2</mn></msub></mrow><annotation encoding="application/x-tex">s_2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>p</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>=</mo><mfrac><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mrow><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo>+</mo><mo stretchy="false">(</mo><mi>δ</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow></mfrac><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">p_1(s_1, s_2) = \frac{s_1^{r}}{s_1^{r} + (\delta s_2)^{r} }.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.2937em;vertical-align:-0.9523em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3414em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6462em;"><span style="top:-2.4337em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.0448em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2663em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9523em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord">.</span></span></span></span></span></p>
<p>The parameter <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi></mrow><annotation encoding="application/x-tex">\delta</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span></span></span></span> sets the level (and direction) of direct discrimination. If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\delta = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>$, then Player 1 always wins. If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi><mo>=</mo><mi mathvariant="normal">∞</mi></mrow><annotation encoding="application/x-tex">\delta = \infty</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord">∞</span></span></span></span>$, then Player 2 always wins. In general, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi><mo>></mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\delta > 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> implies discrimination against Player 1. Note that the prize is symmetric when <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\delta = 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>. In this case, there is no direct discrimination.</p>
<p>The other parameter, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span>, is more subtle. It affects the variance of the lottery in the contest. If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>→</mo><mi mathvariant="normal">∞</mi></mrow><annotation encoding="application/x-tex">r \to \infty</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">→</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord">∞</span></span></span></span>, the prize always goes to the player with the higher score.<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fn3" id="fnref3">[3]</a></sup> If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">r = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>, the prize is allocated at random. This <em>precision parameter</em> changes the marginal returns to effort at different levels. For example, if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo><</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">r < 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>, then the lower effort player gets a disproportionately high return. While such a contest is fair, in the sense that the two players are not treated differently, it is actually rigged in favor of the weaker player.</p>
<p>The final payoffs are:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>U</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>=</mo><mfrac><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mrow><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo>+</mo><mo stretchy="false">(</mo><mi>δ</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow></mfrac><mo>−</mo><msub><mi>s</mi><mn>1</mn></msub></mrow><annotation encoding="application/x-tex">U_1(s_1, s_2) = \frac{s_1^{r}}{s_1^{r} + (\delta s_2)^{r} } - s_1
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.2937em;vertical-align:-0.9523em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3414em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6462em;"><span style="top:-2.4337em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.0448em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2663em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9523em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span></span></p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>U</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>=</mo><mfrac><mrow><mo stretchy="false">(</mo><mi>δ</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><mrow><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo>+</mo><mo stretchy="false">(</mo><mi>δ</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow></mfrac><mo>−</mo><mi>k</mi><msub><mi>s</mi><mn>2</mn></msub></mrow><annotation encoding="application/x-tex">U_2(s_1, s_2) = \frac{(\delta s_2)^{r}}{s_1^{r} + (\delta s_2)^{r} } - k s_2
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.3793em;vertical-align:-0.9523em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6462em;"><span style="top:-2.4337em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.0448em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2663em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9523em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.8444em;vertical-align:-0.15em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span></span></p>
<h3>Assumptions</h3>
<p>We consider pairs <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo separator="true">,</mo><mi>δ</mi></mrow><annotation encoding="application/x-tex">r, \delta</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span></span></span></span> such that the following two conditions are satisfied.</p>
<ol>
<li><em>No reversal:</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi><mo>≤</mo><mi>k</mi></mrow><annotation encoding="application/x-tex">\delta \leq k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8304em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span></li>
<li><em>Pure strategy equilibrium:</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mrow><mo fence="true">(</mo><mfrac><mi>δ</mi><mi>k</mi></mfrac><mo fence="true">)</mo></mrow><mi>r</mi></msup><mo>≥</mo><mi>r</mi><mo>−</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\left( \frac{\delta}{k} \right)^{r} \geq r - 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2844em;vertical-align:-0.35em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size1">(</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size1">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.9344em;"><span style="top:-3.333em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6667em;vertical-align:-0.0833em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span></li>
</ol>
<p>The first assumption prevents excessive discrimination against Player 1 and is without loss of optimality. This is made for simplicity. Without it, we would have to consider more cases.</p>
<p>The second assumption is more important. It is a necessary and sufficient condition for there to be an equilibrium in pure strategies. It is always satisfied if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>≤</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">r \leq 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> and is never satisfied if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>></mo><mn>2</mn></mrow><annotation encoding="application/x-tex">r > 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>. The condition is equivalent to</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>r</mi><mo>≤</mo><mover accent="true"><mi>r</mi><mo>ˉ</mo></mover><mo stretchy="false">(</mo><mi>δ</mi><mi mathvariant="normal">/</mi><mi>k</mi><mo stretchy="false">)</mo><mo>=</mo><mn>1</mn><mo>−</mo><mfrac><mrow><mi>W</mi><mrow><mo fence="true">(</mo><mo>−</mo><mo stretchy="false">(</mo><mi>δ</mi><mi mathvariant="normal">/</mi><mi>k</mi><mo stretchy="false">)</mo><mi>log</mi><mo></mo><mrow><mo fence="true">(</mo><mi>δ</mi><mi mathvariant="normal">/</mi><mi>k</mi><mo fence="true">)</mo></mrow><mo fence="true">)</mo></mrow></mrow><mrow><mi>log</mi><mo></mo><mrow><mo fence="true">(</mo><mi>δ</mi><mi mathvariant="normal">/</mi><mi>k</mi><mo fence="true">)</mo></mrow></mrow></mfrac></mrow><annotation encoding="application/x-tex">r \leq \bar{r}(\delta/k) = 1 - \frac{W \left( - (\delta/k) \log{\left( \delta/k \right)} \right)}{\log{\left( \delta/k \right)}}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord">/</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7278em;vertical-align:-0.0833em;"></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:2.363em;vertical-align:-0.936em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mop">lo<span style="margin-right:0.01389em;">g</span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="minner"><span class="mopen delimcenter" style="top:0em;">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord">/</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose delimcenter" style="top:0em;">)</span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.13889em;">W</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;">(</span><span class="mord">−</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord">/</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mop">lo<span style="margin-right:0.01389em;">g</span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="minner"><span class="mopen delimcenter" style="top:0em;">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord">/</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose delimcenter" style="top:0em;">)</span></span></span><span class="mclose delimcenter" style="top:0em;">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>W</mi></mrow><annotation encoding="application/x-tex">W</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.13889em;">W</span></span></span></span> is the Lambert <em>W</em> function. The upper bound, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mover accent="true"><mi>r</mi><mo>ˉ</mo></mover></mrow><annotation encoding="application/x-tex">\bar{r}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5678em;"></span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span></span></span></span> is a strictly increasing function.</p>
<p class="text-center"><picture><source type="image/svg+xml" srcset="https://www.matthewthom.as/assets/images/fXLRDp03WD-355.svg 355w"><img alt="plot of r upper bound" loading="lazy" decoding="async" src="https://www.matthewthom.as/assets/images/fXLRDp03WD-600.jpeg" width="600" height="414"></picture></p>
<p>It is not obvious, but this condition is <a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#bps">also without loss of optimality</a>.</p>
<h2>Equilibrium</h2>
<p>To find the Nash equilibrium, we need to find the best response functions for each of the players. We do this by maximizing each payoff function. Player 1’s first order condition is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mfrac><mrow><mi>r</mi><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo stretchy="false">(</mo><mi>δ</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><mrow><msub><mi>s</mi><mn>1</mn></msub><msup><mrow><mo fence="true">(</mo><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo>+</mo><mo stretchy="false">(</mo><mi>δ</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup><mo fence="true">)</mo></mrow><mn>2</mn></msup></mrow></mfrac><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\frac{r s_1^{r} (\delta s_2)^{r}}{s_1 \left(s_1^{r}+(\delta s_2)^{r}\right)^2} = 1
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.5373em;vertical-align:-1.1103em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.156em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6462em;"><span style="top:-2.4337em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.0448em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2663em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;">)</span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.954em;"><span style="top:-3.2029em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.1103em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span></span></p>
<p>and Player 2’s first order condition is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mfrac><mrow><mi>r</mi><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo stretchy="false">(</mo><mi>δ</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><mrow><msub><mi>s</mi><mn>2</mn></msub><msup><mrow><mo fence="true">(</mo><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo>+</mo><mo stretchy="false">(</mo><mi>δ</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup><mo fence="true">)</mo></mrow><mn>2</mn></msup></mrow></mfrac><mo>=</mo><mi>k</mi><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">\frac{r s_1^{r } (\delta s_2)^{r}}{s_2 \left(s_1^{r}+(\delta s_2)^{r}\right)^2} = k.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.5373em;vertical-align:-1.1103em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.156em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6462em;"><span style="top:-2.4337em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.0448em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2663em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;">)</span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.954em;"><span style="top:-3.2029em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.1103em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord">.</span></span></span></span></span></p>
<p>This is a system of two equations with two unknowns. Dividing the second by the first gives us <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo>=</mo><mfrac><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><msubsup><mi>s</mi><mn>2</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup></mfrac></mrow><annotation encoding="application/x-tex">k = \frac{s_1^{\star}}{s_2^{\star}}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.6076em;vertical-align:-0.5631em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0445em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6771em;"><span style="top:-2.1885em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span><span style="top:-2.8448em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3115em;"><span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.5102em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7633em;"><span style="top:-2.214em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">1</span></span></span><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.286em;"><span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.5631em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>. So the ratio of the scores does not depend on the discrimination parameters. Thus, any change that increases one also increases the other. With this, we can quickly solve the system of equations to get <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo>=</mo><mfrac><mrow><mi>r</mi><mo stretchy="false">(</mo><mi>k</mi><mi>δ</mi><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><msup><mrow><mo fence="true">(</mo><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup><mo fence="true">)</mo></mrow><mn>2</mn></msup></mfrac></mrow><annotation encoding="application/x-tex">s_1^{\star} = \frac{r (k \delta)^{r} }{\left( k^{r}+\delta^{r} \right)^2}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.9368em;vertical-align:-0.2481em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.5952em;vertical-align:-0.5852em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.01em;"><span style="top:-2.5898em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="minner mtight"><span class="minner mtight"><span class="mopen mtight delimcenter" style="top:0em;"><span class="mtight">(</span></span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5935em;"><span style="top:-2.786em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mbin mtight">+</span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5935em;"><span style="top:-2.786em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose mtight delimcenter" style="top:0em;"><span class="mtight">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8575em;"><span style="top:-2.8971em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span><span class="mopen mtight">(</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span><span class="mclose mtight"><span class="mclose mtight">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7385em;"><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.5852em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mi>s</mi><mn>2</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo>=</mo><mfrac><mrow><mi>r</mi><mo stretchy="false">(</mo><mi>k</mi><mi>δ</mi><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><mrow><mi>k</mi><msup><mrow><mo fence="true">(</mo><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup><mo fence="true">)</mo></mrow><mn>2</mn></msup></mrow></mfrac></mrow><annotation encoding="application/x-tex">s_2^{\star} = \frac{r (k \delta)^{r} }{k \left( k^{r}+\delta^{r} \right)^2}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.9368em;vertical-align:-0.2481em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.5952em;vertical-align:-0.5852em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.01em;"><span style="top:-2.5898em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="minner mtight"><span class="minner mtight"><span class="mopen mtight delimcenter" style="top:0em;"><span class="mtight">(</span></span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5935em;"><span style="top:-2.786em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mbin mtight">+</span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5935em;"><span style="top:-2.786em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose mtight delimcenter" style="top:0em;"><span class="mtight">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8575em;"><span style="top:-2.8971em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span><span class="mopen mtight">(</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span><span class="mclose mtight"><span class="mclose mtight">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7385em;"><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.5852em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>.</p>
<p>In order for the first order approach to be valid, we have to check the second order and boundary conditions.</p>
<p><strong>The second order conditions</strong> require the second derivative of the payoffs to be negative at the equilibrium. They are satisfied if and only if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mrow><mo fence="true">(</mo><mfrac><mi>k</mi><mi>δ</mi></mfrac><mo fence="true">)</mo></mrow><mi>r</mi></msup><mo>></mo><mfrac><mrow><mi>r</mi><mo>−</mo><mn>1</mn></mrow><mrow><mi>r</mi><mo>+</mo><mn>1</mn></mrow></mfrac></mrow><annotation encoding="application/x-tex">\left( \frac{k}{\delta} \right)^{r} > \frac{r - 1}{r + 1}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2844em;vertical-align:-0.35em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size1">(</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size1">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.9344em;"><span style="top:-3.333em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.2484em;vertical-align:-0.4033em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span><span class="mbin mtight">+</span><span class="mord mtight">1</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span><span class="mbin mtight">−</span><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4033em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>. This inequality holds by Assumption 1.</p>
<p><strong>The boundary conditions</strong> require that payoffs are non-negative at the proposed equilibrium. Otherwise, the player would prefer to chose a score of zero. Using <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo>=</mo><mfrac><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><msubsup><mi>s</mi><mn>2</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup></mfrac></mrow><annotation encoding="application/x-tex">k = \frac{s_1^{\star}}{s_2^{\star}}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.6076em;vertical-align:-0.5631em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0445em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6771em;"><span style="top:-2.1885em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span><span style="top:-2.8448em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3115em;"><span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.5102em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7633em;"><span style="top:-2.214em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">1</span></span></span><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.286em;"><span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.5631em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>, we can dramatically simplify the equilibrium payoffs:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>U</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo separator="true">,</mo><msubsup><mi>s</mi><mn>2</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo stretchy="false">)</mo><mo>=</mo><mfrac><msup><mi>k</mi><mi>r</mi></msup><mrow><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup></mrow></mfrac><mo>−</mo><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup></mrow><annotation encoding="application/x-tex">U_1(s_1^{\star}, s_2^{\star}) = \frac{k^{r}}{k^{r} + \delta^{r}} - s_1^{\star}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.1408em;vertical-align:-0.7693em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3714em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7693em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.9857em;vertical-align:-0.247em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span></span></span></span></span></p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>U</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo separator="true">,</mo><msubsup><mi>s</mi><mn>2</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo stretchy="false">)</mo><mo>=</mo><mfrac><msup><mi>δ</mi><mi>r</mi></msup><mrow><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup></mrow></mfrac><mo>−</mo><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">U_2(s_1^{\star}, s_2^{\star}) = \frac{\delta^{r}}{k^{r} + \delta^{r}} - s_1^{\star}.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.1408em;vertical-align:-0.7693em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3714em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7693em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.9857em;vertical-align:-0.247em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mord">.</span></span></span></span></span></p>
<p>By Assumption 1, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>U</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo separator="true">,</mo><msubsup><mi>s</mi><mn>2</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo stretchy="false">)</mo><mo>≤</mo><msub><mi>U</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo separator="true">,</mo><msubsup><mi>s</mi><mn>2</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">U_2(s_1^{\star}, s_2^{\star}) \leq U_1(s_1^{\star}, s_2^{\star})</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mclose">)</span></span></span></span>. So, we only need a condition such that Player 2 has a positive payoff. Substituting <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo>=</mo><mfrac><mrow><mi>r</mi><mo stretchy="false">(</mo><mi>k</mi><mi>δ</mi><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><msup><mrow><mo fence="true">(</mo><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup><mo fence="true">)</mo></mrow><mn>2</mn></msup></mfrac></mrow><annotation encoding="application/x-tex">s_1^{\star} = \frac{r (k \delta)^{r} }{\left( k^{r}+\delta^{r} \right)^2}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.9368em;vertical-align:-0.2481em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.5952em;vertical-align:-0.5852em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.01em;"><span style="top:-2.5898em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="minner mtight"><span class="minner mtight"><span class="mopen mtight delimcenter" style="top:0em;"><span class="mtight">(</span></span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5935em;"><span style="top:-2.786em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mbin mtight">+</span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5935em;"><span style="top:-2.786em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose mtight delimcenter" style="top:0em;"><span class="mtight">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8575em;"><span style="top:-2.8971em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span><span class="mopen mtight">(</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span><span class="mclose mtight"><span class="mclose mtight">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7385em;"><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.5852em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span> gives our lowest payoff</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>U</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msubsup><mi>s</mi><mn>1</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo separator="true">,</mo><msubsup><mi>s</mi><mn>2</mn><mo lspace="0em" rspace="0em">⋆</mo></msubsup><mo stretchy="false">)</mo><mo>=</mo><mfrac><msup><mi>δ</mi><mi>r</mi></msup><mrow><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup></mrow></mfrac><mo>−</mo><mfrac><mrow><mi>r</mi><mo stretchy="false">(</mo><mi>k</mi><mi>δ</mi><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><msup><mrow><mo fence="true">(</mo><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup><mo fence="true">)</mo></mrow><mn>2</mn></msup></mfrac><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">U_2(s_1^{\star}, s_2^{\star}) = \frac{\delta^{r}}{k^{r} + \delta^{r}} - \frac{r (k \delta)^{r} }{\left( k^{r}+\delta^{r} \right)^2}.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7387em;"><span style="top:-2.453em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">⋆</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.247em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.1408em;vertical-align:-0.7693em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3714em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7693em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:2.521em;vertical-align:-1.094em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.156em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;">)</span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.954em;"><span style="top:-3.2029em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.094em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord">.</span></span></span></span></span></p>
<p>It’s not obvious that this is non-negative by Assumption 2. However, it just requires some factoring.</p>
<h2>Contest design</h2>
<p>Suppose that there is some contest designer who can choose <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span> and/or <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi></mrow><annotation encoding="application/x-tex">\delta</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span></span></span></span> in order to maximize the revenue, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>1</mn></msub><mo>+</mo><msub><mi>s</mi><mn>2</mn></msub></mrow><annotation encoding="application/x-tex">s_1 + s_2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7333em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span>. Because we know that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo>=</mo><mfrac><msub><mi>s</mi><mn>1</mn></msub><msub><mi>s</mi><mn>2</mn></msub></mfrac></mrow><annotation encoding="application/x-tex">k = \frac{s_1}{s_2}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1566em;vertical-align:-0.4451em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.7115em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3173em;"><span style="top:-2.357em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.143em;"><span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.4101em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3173em;"><span style="top:-2.357em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.143em;"><span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4451em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>, we are actually trying to maximize <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">(</mo><mn>1</mn><mo>+</mo><msup><mi>k</mi><mrow><mo>−</mo><mn>1</mn></mrow></msup><mo stretchy="false">)</mo><msub><mi>s</mi><mn>1</mn></msub></mrow><annotation encoding="application/x-tex">(1 + k^{-1}) s_1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1.0641em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mtight">1</span></span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span>. Because <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi></mrow><annotation encoding="application/x-tex">k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span> is constant, maximizing <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>1</mn></msub></mrow><annotation encoding="application/x-tex">s_1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> is enough.</p>
<h3>Direct discrimination</h3>
<p>Suppose <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span> is fixed. For now, assume it is one. To maximize revenue, we need to maximize <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>1</mn></msub></mrow><annotation encoding="application/x-tex">s_1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span>. Suppose that we can directly discriminate using <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi></mrow><annotation encoding="application/x-tex">\delta</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span></span></span></span>. Then, our problem is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><munder><mrow><mi>max</mi><mo></mo></mrow><mi>δ</mi></munder><mfrac><mrow><mi>k</mi><mi>δ</mi></mrow><mrow><mo stretchy="false">(</mo><mi>k</mi><mo>+</mo><mi>δ</mi><msup><mo stretchy="false">)</mo><mn>2</mn></msup></mrow></mfrac><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">\max_{\delta} \frac{k \delta}{( k + \delta )^2}.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.3074em;vertical-align:-0.936em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.3479em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7521em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3714em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7401em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord">.</span></span></span></span></span></p>
<p>This maximum is obtained at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>δ</mi><mo>⋆</mo></msup><mo>=</mo><mi>k</mi></mrow><annotation encoding="application/x-tex">\delta^\star = k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span>.</p>
<p class="text-center"><picture><source type="image/svg+xml" srcset="https://www.matthewthom.as/assets/images/gIF_Y5ICBA-350.svg 350w"><img alt="plot of s1 that we maximize for delta" loading="lazy" decoding="async" src="https://www.matthewthom.as/assets/images/gIF_Y5ICBA-600.jpeg" width="600" height="409"></picture></p>
<p>In this case, the revenue is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable rowspacing="0.25em" columnalign="right left" columnspacing="0em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><msub><mi>s</mi><mn>1</mn></msub><mo>+</mo><msub><mi>s</mi><mn>2</mn></msub></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mrow><mo fence="true">(</mo><mn>1</mn><mo>+</mo><mfrac><mn>1</mn><mi>k</mi></mfrac><mo fence="true">)</mo></mrow><msub><mi>s</mi><mn>1</mn></msub></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mrow><mo fence="true">(</mo><mn>1</mn><mo>+</mo><mfrac><mn>1</mn><mi>k</mi></mfrac><mo fence="true">)</mo></mrow><mfrac><msup><mi>k</mi><mn>2</mn></msup><mrow><mo stretchy="false">(</mo><mn>2</mn><mi>k</mi><msup><mo stretchy="false">)</mo><mn>2</mn></msup></mrow></mfrac></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mfrac><mrow><mn>1</mn><mo>+</mo><mi>k</mi></mrow><mrow><mn>4</mn><mi>k</mi></mrow></mfrac></mrow></mstyle></mtd></mtr></mtable><annotation encoding="application/x-tex">\begin{aligned}
s_1 + s_2 &= \left( 1 + \frac{1}{k} \right) s_1 \\
&= \left( 1 + \frac{1}{k} \right) \frac{k^2}{( 2 k )^2} \\
&= \frac{1 + k}{4 k}
\end{aligned}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:7.7986em;vertical-align:-3.6493em;"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:4.1493em;"><span style="top:-6.1904em;"><span class="pstrut" style="height:3.4911em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span><span style="top:-3.4493em;"><span class="pstrut" style="height:3.4911em;"></span><span class="mord"></span></span><span style="top:-0.8278em;"><span class="pstrut" style="height:3.4911em;"></span><span class="mord"></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.6493em;"><span></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:4.1493em;"><span style="top:-6.1904em;"><span class="pstrut" style="height:3.4911em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span><span style="top:-3.4493em;"><span class="pstrut" style="height:3.4911em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4911em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mopen">(</span><span class="mord">2</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7401em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-0.8278em;"><span class="pstrut" style="height:3.4911em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3714em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">4</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.6493em;"><span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>If we allow <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span> to take any positive value, then the optimal delta will still be <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>δ</mi><mo>⋆</mo></msup><mo>=</mo><mi>k</mi></mrow><annotation encoding="application/x-tex">\delta^\star = k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span>. This result comes from the optimization problem</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><munder><mrow><mi>max</mi><mo></mo></mrow><mi>δ</mi></munder><mfrac><mrow><mi>r</mi><mo stretchy="false">(</mo><mi>k</mi><mi>δ</mi><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><msup><mrow><mo fence="true">(</mo><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup><mo fence="true">)</mo></mrow><mn>2</mn></msup></mfrac></mrow><annotation encoding="application/x-tex">\max_{\delta} \frac{r (k \delta)^{r} }{\left( k^{r}+\delta^{r} \right)^2}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.521em;vertical-align:-1.094em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.3479em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7521em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.156em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;">)</span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.954em;"><span style="top:-3.2029em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.094em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>which has the following first order condition:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mfrac><mrow><msup><mi>r</mi><mn>2</mn></msup><mo stretchy="false">(</mo><mi>δ</mi><mi>k</mi><msup><mo stretchy="false">)</mo><mi>r</mi></msup><mo stretchy="false">(</mo><msup><mi>k</mi><mi>r</mi></msup><mo>−</mo><msup><mi>δ</mi><mi>r</mi></msup><mo stretchy="false">)</mo></mrow><mrow><mi>δ</mi><mo stretchy="false">(</mo><msup><mi>k</mi><mi>r</mi></msup><mo>+</mo><msup><mi>δ</mi><mi>r</mi></msup><msup><mo stretchy="false">)</mo><mn>3</mn></msup></mrow></mfrac><mo>=</mo><mn>0.</mn></mrow><annotation encoding="application/x-tex">\frac{r^2 ( \delta k)^{r} ( k^{r} - \delta^{r} )}{ \delta ( k^{r} + \delta^{r} )^3 } = 0.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.4271em;vertical-align:-0.936em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4911em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7401em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">3</span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0.</span></span></span></span></span></p>
<h3>Covert discrimination</h3>
<p>Suppose that the contest designer cannot discriminate directly. So <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\delta = 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>, and the designer chooses <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span> in order to maximize the revenue of the contest. Then, our problem is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><munder><mrow><mi>max</mi><mo></mo></mrow><mi>r</mi></munder><mfrac><mrow><mi>r</mi><msup><mi>k</mi><mi>r</mi></msup></mrow><mrow><mo stretchy="false">(</mo><mn>1</mn><mo>+</mo><msup><mi>k</mi><mi>r</mi></msup><msup><mo stretchy="false">)</mo><mn>2</mn></msup></mrow></mfrac><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex">\max_{r} \frac{r k^{r}}{( 1 + k^r )^2}.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.3074em;vertical-align:-0.936em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.4em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3714em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mopen">(</span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7401em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord">.</span></span></span></span></span></p>
<p>If we take first order conditions and solve, we get</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>r</mi><mo>=</mo><mfrac><mn>1</mn><mrow><mi>log</mi><mo></mo><mo stretchy="false">(</mo><mi>k</mi><mo stretchy="false">)</mo></mrow></mfrac><msup><mrow><mo fence="true">(</mo><mn>1</mn><mo>−</mo><mfrac><mn>2</mn><mrow><mn>1</mn><mo>+</mo><msup><mi>k</mi><mi>r</mi></msup></mrow></mfrac><mo fence="true">)</mo></mrow><mrow><mo>−</mo><mn>1</mn></mrow></msup></mrow><annotation encoding="application/x-tex">r = \frac{1}{\log(k)} \left( 1 - \frac{2}{1 + k^{r}} \right)^{-1}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.604em;vertical-align:-0.95em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mop">lo<span style="margin-right:0.01389em;">g</span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.936em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7693em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:1.654em;"><span style="top:-3.9029em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mtight">1</span></span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>which defines implicit function <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>r</mi><mo>⋆</mo></msup><mo stretchy="false">(</mo><mi>k</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">r^\star(k)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span></span></span></span>. However, these values cannot be attained unless <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi></mrow><annotation encoding="application/x-tex">k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span> is sufficiently large. Recall that there is no pure strategy equilibrium if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>></mo><mover accent="true"><mi>r</mi><mo>ˉ</mo></mover></mrow><annotation encoding="application/x-tex">r > \bar{r}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.5678em;"></span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span></span></span></span>. So, there is no way to reach some of these values.</p>
<p class="text-center"><picture><source type="image/svg+xml" srcset="https://www.matthewthom.as/assets/images/L9JhAioNIb-357.svg 357w"><img alt="plot of s1 that we maximize for delta" loading="lazy" decoding="async" src="https://www.matthewthom.as/assets/images/L9JhAioNIb-600.jpeg" width="600" height="408"></picture></p>
<p>If you set up a Lagrangian as in Proposition 3 of <a href="https://econpapers.repec.org/RePEc:eee:poleco:v:20:y:2004:i:4:p:1059-1066">Nti (2004)</a>, then you find that the constrained optimum is the minimum of the two pictured curves. No exact representation of the intersection is known. However, it is approximately <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo>=</mo><mn>3.509</mn></mrow><annotation encoding="application/x-tex">k = 3.509</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">3.509</span></span></span></span>.</p>
<h3>Overall optimum</h3>
<p>We know that if both forms of discrimination are allowed, then <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>δ</mi><mo>⋆</mo></msup><mo>=</mo><mi>k</mi></mrow><annotation encoding="application/x-tex">\delta^\star = k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span> because this is the optimum for any <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span>. As you can see in the first plot, this means that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mover accent="true"><mi>r</mi><mo>ˉ</mo></mover><mo>=</mo><mn>2</mn></mrow><annotation encoding="application/x-tex">\bar{r} = 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5678em;"></span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>. We will show that this is also the constrained optimum. Our optimization problem is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><munder><mrow><mi>max</mi><mo></mo></mrow><mrow><mi>r</mi><mo>≤</mo><mn>2</mn></mrow></munder><mfrac><mi>r</mi><mn>4</mn></mfrac></mrow><annotation encoding="application/x-tex">\max_{r \leq 2} \frac{r}{4}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.9198em;vertical-align:-0.8123em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.3829em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span><span class="mrel mtight">≤</span><span class="mord mtight">2</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.8123em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.1076em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">4</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>which is obviously attained at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>=</mo><mn>2</mn></mrow><annotation encoding="application/x-tex">r = 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>. So, the optimal revenue is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">(</mo><mn>1</mn><mo>+</mo><msup><mi>k</mi><mrow><mo>−</mo><mn>1</mn></mrow></msup><mo stretchy="false">)</mo><mfrac><mn>2</mn><mn>4</mn></mfrac><mo>=</mo><mfrac><mrow><mn>1</mn><mo>+</mo><mi>k</mi></mrow><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">(1 + k^{-1}) \frac{2}{4} = \frac{1 + k}{2 k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mtight">1</span></span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">4</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.2251em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>.</p>
<h2 id="bps">Beyond pure strategies</h2>
<p>Assumption 2, which guarantees that equilibria exist in pure strategies is without loss of optimality. So, the solutions in the previous sections hold for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>≥</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">r \geq 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>.</p>
<p>If payoffs are symmetric, Assumption 2 is violated if and only if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>></mo><mn>2</mn></mrow><annotation encoding="application/x-tex">r > 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>. In this case, <a href="https://econpapers.repec.org/RePEc:kap:pubcho:v:81:y:1994:i:3-4:p:363-80">Baye et al. (1994)</a> shows that when there is a symmetric mixed strategy equilibrium in which both players receive a payoff of zero.<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fn4" id="fnref4">[4]</a></sup> This means that when <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi><mo>=</mo><mi>k</mi></mrow><annotation encoding="application/x-tex">\delta = k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span>,</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable rowspacing="0.25em" columnalign="right left" columnspacing="0em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mi>E</mi><mrow><mo fence="true">[</mo><mfrac><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mrow><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo>+</mo><mo stretchy="false">(</mo><mi>k</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow></mfrac><mo fence="true">]</mo></mrow></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mi>k</mi><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mi>E</mi><mrow><mo fence="true">[</mo><mfrac><mrow><mo stretchy="false">(</mo><mi>k</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow><mrow><msubsup><mi>s</mi><mn>1</mn><mi>r</mi></msubsup><mo>+</mo><mo stretchy="false">(</mo><mi>k</mi><msub><mi>s</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mi>r</mi></msup></mrow></mfrac><mo fence="true">]</mo></mrow></mrow></mstyle></mtd></mtr></mtable><annotation encoding="application/x-tex">\begin{aligned}
E[s_1] &= E \left[ \frac{s_1^{r}}{s_1^{r} + (k s_2)^{r} } \right] \\
k E[s_2] &= E \left[ \frac{(k s_2)^{r}}{s_1^{r} + (k s_2)^{r} } \right]
\end{aligned}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:5.4046em;vertical-align:-2.4523em;"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.9523em;"><span style="top:-4.9523em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span><span style="top:-2.25em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.4523em;"><span></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.9523em;"><span style="top:-4.9523em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">[</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3414em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6462em;"><span style="top:-2.4337em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.0448em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2663em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-2.4519em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2481em;"><span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9523em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">]</span></span></span></span></span><span style="top:-2.25em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">[</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6462em;"><span style="top:-2.4337em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span><span style="top:-3.0448em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2663em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5904em;"><span style="top:-2.989em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6644em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9523em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">]</span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.4523em;"><span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>Symmetry implies that that each player’s expected probability of winning is one half. Therefore, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">]</mo><mo>=</mo><mfrac><mn>1</mn><mn>2</mn></mfrac></mrow><annotation encoding="application/x-tex">E[s_1] = \frac{1}{2}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo><mo>=</mo><mfrac><mn>1</mn><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">E[s_2] = \frac{1}{2 k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>, and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo>+</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo><mo>=</mo><mfrac><mrow><mn>1</mn><mo>+</mo><mi>k</mi></mrow><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">E[s_1 + s_2] = \frac{1 + k}{2 k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.2251em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>. This is the same maximum revenue as in the overall optimum in pure strategies. It’s not obvious that this is the maximum revenue. For example, one might imagine that the principal could ensure zero payoffs but have Player 1 win with probability greater than one half. In order to confirm that Assumption 2 is without loss of optimality, we need to answer a few questions.</p>
<p><strong>Are equilibria revenue equivalent?</strong> Yes. <a href="https://econpapers.repec.org/RePEc:eee:ecolet:v:157:y:2017:i:c:p:167-170">Ewerhart (2017a)</a> shows that the equilibrium is unique when <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>≤</mo><mn>2</mn></mrow><annotation encoding="application/x-tex">r \leq 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7719em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span> and <a href="https://econpapers.repec.org/RePEc:eee:gamebe:v:105:y:2017:i:c:p:195-211">Ewerhart (2017b)</a> shows that equilibria are revenue and payoff equivalent when <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>></mo><mn>2</mn></mrow><annotation encoding="application/x-tex">r > 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>.</p>
<p><strong>Is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>∈</mo><mo stretchy="false">(</mo><mover accent="true"><mi>r</mi><mo>ˉ</mo></mover><mo stretchy="false">(</mo><mi>δ</mi><mi mathvariant="normal">/</mi><mi>k</mi><mo stretchy="false">)</mo><mo separator="true">,</mo><mn>2</mn><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">r \in (\bar{r}( \delta / k ), 2]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord">/</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">2</span><span class="mclose">]</span></span></span></span> ever optimal</strong> No. <a href="https://econpapers.repec.org/RePEc:bpj:bejtec:v:10:y:2010:i:1:n:13">Wang (2010)</a> shows that revenue is</p>
<p><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mrow><mn>2</mn><mi>δ</mi></mrow><mrow><mi>r</mi><mi>k</mi></mrow></mfrac><mrow><mo fence="true">(</mo><mfrac><mrow><mn>1</mn><mo>+</mo><mi>k</mi></mrow><mrow><mn>2</mn><mi>k</mi></mrow></mfrac><mo fence="true">)</mo></mrow><mo stretchy="false">(</mo><mi>r</mi><mo>−</mo><mn>1</mn><msup><mo stretchy="false">)</mo><mrow><mo stretchy="false">(</mo><mi>r</mi><mo>−</mo><mn>1</mn><mo stretchy="false">)</mo><mi mathvariant="normal">/</mi><mi>r</mi></mrow></msup></mrow><annotation encoding="application/x-tex">\frac{2 \delta}{r k} \left( \frac{1 + k}{2 k} \right) (r - 1)^{(r - 1)/r}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2301em;vertical-align:-0.35em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size1">(</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size1">)</span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1.138em;vertical-align:-0.25em;"></span><span class="mord">1</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.888em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mopen mtight">(</span><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span><span class="mbin mtight">−</span><span class="mord mtight">1</span><span class="mclose mtight">)</span><span class="mord mtight">/</span><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>on this interval which is weakly decreasing in <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span>. Therefore, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>=</mo><mover accent="true"><mi>r</mi><mo>ˉ</mo></mover><mo stretchy="false">(</mo><mi>δ</mi><mi mathvariant="normal">/</mi><mi>k</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">r = \bar{r}( \delta / k )</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord">/</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span></span></span></span> yields weakly greater revenue.</p>
<p><strong>Is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>></mo><mn>2</mn></mrow><annotation encoding="application/x-tex">r > 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span> ever optimal?</strong> No. <a href="https://econpapers.repec.org/RePEc:eee:pubeco:v:94:y:2010:i:1-2:p:1-7">Alcade and Dahm (2010)</a> show that if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>></mo><mn>2</mn></mrow><annotation encoding="application/x-tex">r > 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>, the Tullock contest is revenue and payoff equivalent to an all-pay auction. Revenue in this auction is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mrow><mo fence="true">(</mo><mfrac><mi>δ</mi><mi>k</mi></mfrac><mo fence="true">)</mo></mrow><mfrac><mrow><mn>1</mn><mo>+</mo><mi>k</mi></mrow><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">\left( \frac{\delta}{k} \right) \frac{1 + k}{2 k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2301em;vertical-align:-0.35em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size1">(</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03785em;">δ</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size1">)</span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>. This is the same revenue as when <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo>=</mo><mn>2</mn></mrow><annotation encoding="application/x-tex">r = 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>.</p>
<p><strong>Is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi><mo><</mo><mi>k</mi></mrow><annotation encoding="application/x-tex">\delta < k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span> ever optimal?</strong> No. Note that the revenue in the last two points is increasing in <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>δ</mi></mrow><annotation encoding="application/x-tex">\delta</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span></span></span></span>.</p>
<p class="text-center"><picture><source type="image/svg+xml" srcset="https://www.matthewthom.as/assets/images/Dx3BT-Khsd-350.svg 350w"><img alt="revenue for at each r for k = 1.5" loading="lazy" decoding="async" src="https://www.matthewthom.as/assets/images/Dx3BT-Khsd-600.jpeg" width="600" height="411"></picture></p>
<p>The above shows an example of how revenue depends on <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span>. Note that the maximum is reached before <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mover accent="true"><mi>r</mi><mo>ˉ</mo></mover><mo stretchy="false">(</mo><mi>δ</mi><mi mathvariant="normal">/</mi><mi>k</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">\bar{r}(\delta / k)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord accent"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.5678em;"><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span class="accent-body" style="left:-0.1944em;"><span class="mord">ˉ</span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord">/</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span></span></span></span> when the players are very heterogeneous (orange) and at the upper bound when players are more homogeneous (blue).<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fn5" id="fnref5">[5]</a></sup></p>
<h2>Conclusion</h2>
<p>This table summarizes the results that we have about each type of optimal contest. There is not much to summarize for covert discrimination because there aren’t any closed form expressions.</p>
<table>
<thead>
<tr>
<th></th>
<th style="text-align:center">$$r,\delta$$</th>
<th style="text-align:center">Payoffs</th>
<th style="text-align:center">Revenue</th>
</tr>
</thead>
<tbody>
<tr>
<td>No discrimination</td>
<td style="text-align:center">1, 1</td>
<td style="text-align:center"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><msup><mi>k</mi><mn>2</mn></msup><mrow><mo stretchy="false">(</mo><mn>1</mn><mo>+</mo><mi>k</mi><msup><mo stretchy="false">)</mo><mn>2</mn></msup></mrow></mfrac><mo separator="true">,</mo><mfrac><mn>1</mn><mrow><mo stretchy="false">(</mo><mn>1</mn><mo>+</mo><mi>k</mi><msup><mo stretchy="false">)</mo><mn>2</mn></msup></mrow></mfrac></mrow><annotation encoding="application/x-tex">\frac{k^2}{(1+k)^2}, \frac{1}{(1+k)^2}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.5379em;vertical-align:-0.52em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0179em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mopen mtight">(</span><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="mclose mtight"><span class="mclose mtight">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7463em;"><span style="top:-2.786em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8913em;"><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.52em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mopen mtight">(</span><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="mclose mtight"><span class="mclose mtight">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7463em;"><span style="top:-2.786em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.52em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></td>
<td style="text-align:center"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mn>1</mn><mrow><mi>k</mi><mo>+</mo><mn>1</mn></mrow></mfrac></mrow><annotation encoding="application/x-tex">\frac{1}{k+1}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2484em;vertical-align:-0.4033em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span><span class="mbin mtight">+</span><span class="mord mtight">1</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4033em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></td>
</tr>
<tr>
<td>Direct ($$r$ fixed)</td>
<td style="text-align:center"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo separator="true">,</mo><mi>k</mi></mrow><annotation encoding="application/x-tex">r,k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span></td>
<td style="text-align:center"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mrow><mn>2</mn><mo>−</mo><mi>r</mi></mrow><mn>4</mn></mfrac><mo separator="true">,</mo><mfrac><mrow><mn>2</mn><mo>−</mo><mi>r</mi></mrow><mn>4</mn></mfrac></mrow><annotation encoding="application/x-tex">\frac{2-r}{4}, \frac{2-r}{4}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">4</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mbin mtight">−</span><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">4</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mbin mtight">−</span><span class="mord mathnormal mtight" style="margin-right:0.02778em;">r</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></td>
<td style="text-align:center"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mrow><mn>1</mn><mo>+</mo><mi>k</mi></mrow><mrow><mn>4</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">\frac{1+k}{4k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2251em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">4</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></td>
</tr>
<tr>
<td>Covert ($$\delta = 1$$)</td>
<td style="text-align:center"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi><mo stretchy="false">(</mo><mi>k</mi><mo stretchy="false">)</mo><mo separator="true">,</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">r(k),1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span></span></span></span></td>
<td style="text-align:center"></td>
<td style="text-align:center"></td>
</tr>
<tr>
<td>Unrestricted</td>
<td style="text-align:center"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mn>2</mn><mo separator="true">,</mo><mi>k</mi></mrow><annotation encoding="application/x-tex">2,k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord">2</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span></td>
<td style="text-align:center">0, 0</td>
<td style="text-align:center"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mrow><mn>1</mn><mo>+</mo><mi>k</mi></mrow><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">\frac{1+k}{2k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.2251em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8801em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></td>
</tr>
</tbody>
</table>
<p>The case of covert discrimination demonstrates an important precision tradeoff. Choosing a large value of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>r</mi></mrow><annotation encoding="application/x-tex">r</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span></span></span></span> increases competitiveness by awarding the prize more frequently to the player with the higher score. However, choosing a low value allows you to discriminate against the stronger player – which also increases competitiveness. The effect that wins out depends on the size of the asymmetry between players. When <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi></mrow><annotation encoding="application/x-tex">k</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6944em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span></span></span></span> is large enough, this discrimination effect wins out. However, when direct discrimination is possible, there is no advantage to covert discrimination.</p>
<hr>
<hr class="footnotes-sep">
<section class="footnotes">
<ol class="footnotes-list">
<li id="fn1" class="footnote-item"><p>Tullock contests were introduced 1980 by Gordon Tullock. The other major lottery contest is the rank order contest <a href="https://econpapers.repec.org/RePEc:ucp:jpolec:v:89:y:1981:i:5:p:841-64">(Lazear and Rosen 1981)</a>. <a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fnref1" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn2" class="footnote-item"><p>The papers mentioned give different prize values instead of different costs. The two are equivalent. I prefer to say that one player is more skilled than to say that one player values the prize more. <a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fnref2" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn3" class="footnote-item"><p>In this case, it is not a lottery contest. It converges to the all-pay auction – the main deterministic contest. <a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fnref3" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn4" class="footnote-item"><p>The symmetric equilibrium is characterized in <a href="https://econpapers.repec.org/RePEc:spr:joecth:v:60:y:2015:i:1:p:59-71">Ewerhart (2015)</a>. <a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fnref4" class="footnote-backref">↩︎</a></p>
</li>
<li id="fn5" class="footnote-item"><p>More figures like the above can be found in <a href="https://econpapers.repec.org/RePEc:oxf:wpaper:915">Chowdhury et al. (2020)</a>. <a href="https://www.matthewthom.as/blog/covert-discrimination-tullock/#fnref5" class="footnote-backref">↩︎</a></p>
</li>
</ol>
</section>
Fix the R Library Bug on Windows 10
2021-04-16T00:00:00Z
https://www.matthewthom.as/blog/r-fix-onedrive/
<p>This is a quick post about how to fix an annoying R bug on Windows 10 caused by OneDrive. Many users use OneDrive to sync their Documents folder. Unfortunately, R stores libraries in the Documents folder, and OneDrive creates sync locks that interfere with the installation and updating of packages.</p>
<p>The solution is to set the <code>R_LIBS_USER</code> environment variable to a folder that is not synced by OneDrive. This can be done by running <a href="https://www.matthewthom.as/gh/scripts/r_fix/r_fix.ps1">this script</a> or by following these steps:</p>
<ol>
<li>Open the Run window (<kbd>Win</kbd> + <kbd>R</kbd>)</li>
<li>Paste <code>rundll32 sysdm.cpl,EditEnvironmentVariables</code> and hit OK.</li>
<li>Click New… under “User variables” (the top panel)</li>
<li>Paste variable name <code>R_LIBS_USER</code></li>
<li>You can use Browse Directory… to choose any folder that is not synced with OneDrive (eg. <code>C:\Users\username\R</code>)</li>
</ol>
<p>Now that you changed your library directory, you’ll need to reinstall your libraries. You could copy them from OneDrive, but some may be damaged.</p>
<p>Steps 1 and 2 can be replaced by searching for some part of “Edit environment variables for the current user” in the start menu. This is easier to remember, but this guide provides the shortest path.</p>
Optimal Fair Contests
2021-09-30T00:00:00Z
https://www.matthewthom.as/blog/optimal-fair-contests/
<p>I show that any efficient two player symmetric allocation rule between risk neutral, heterogenous players generates weakly less revenue than one of two contests. The revenue maximizing efficient symmetric contest is an all-pay auction with bid caps <a href="https://econpapers.repec.org/RePEc:aea:aecrev:v:88:y:1998:i:3:p:643-51">(Che and Gale 1998)</a> when heterogeneity is low and a difference form contest <a href="https://econpapers.repec.org/RePEc:eee:gamebe:v:30:y:2000:i:1:p:22-43">(Che and Gale 2000)</a> when heterogeneity is high.</p>
<p class="text-center"><picture><source type="image/svg+xml" srcset="https://www.matthewthom.as/assets/images/aNmR4tCUBh-273.svg 273w"><img alt="plot of optimal revenue vs Tullock contests" loading="lazy" decoding="async" src="https://www.matthewthom.as/assets/images/aNmR4tCUBh-600.jpeg" width="600" height="400"></picture></p>
<h2>Introduction</h2>
<p>Contests are models of conflict in which risk neutral players exert costly effort to win a prize. When one player is more capable than another, contests become less competitive. This lack of competitiveness decreases total effort. A contest designer can use two common tools to increase the total effort: reserve bids <a href="https://econpapers.repec.org/RePEc:eee:reecon:v:70:y:2016:i:3:p:446-453">(Bertoletti 2016)</a> and direct discrimination (<a href="https://econpapers.repec.org/RePEc:eee:ecolet:v:157:y:2017:i:c:p:167-170">Ewerhart 2017</a>; <a href="https://econpapers.repec.org/RePEc:eee:eecrev:v:104:y:2018:i:c:p:22-37">Franke, Leininger, and Wasser 2018</a>).</p>
<p>Reserve bids (i.e. inefficient allocation rules) allow the contest designer to require either player to exert some minimum amount of effort to qualify for the prize. A large enough reserve bid can make the lack of competition from a competitor irrelevant. For example, a professional figure skater would not need to exert much effort to beat me in a figure skating competition. However, if winning a large prize requires a high score, then the professional is not really competing against me. He is competing against this reserve bid. A large enough reserve bid can ensure any amount of individually rational effort.</p>
<p>Discrimination allows the contest designer to discriminate against the stronger player to reduce or remove her advantage. Handicaps in sporting events are a common example. This requires the contest designer to know which contestant is more talented. Otherwise, the designer does not know who to handicap. If this information is known, direct discrimination can be used to level the playing field of any contest.</p>
<p>We consider an alternative way of maximizing revenue – “fair” design. The contest designer maximizes the revenue of a contest under complete information without withholding the prize or treating contestants differently. We show that under these conditions, the designer is unable to achieve the first best and must give a positive payoff to the stronger player. However, allowing an arbitrarily reserve bid or direct discrimination ensures that the first best revenue can be achieved.</p>
<p>This work takes a similar approach to <a href="https://econpapers.repec.org/RePEc:cpr:ceprdp:14854">Letina, Liu, and Netzer (2020)</a>. However, unlike this work, I do not allow the principal to engage in direct discrimination or modify/withhold the prize. This work on optimal contest design contributes to a literature on revenue dominance in symmetric efficient contests (<a href="https://econpapers.repec.org/RePEc:kap:pubcho:v:112:y:2002:i:3-4:p:351-71">Fang 2002</a>; <a href="https://econpapers.repec.org/RePEc:eee:gamebe:v:83:y:2014:i:c:p:116-126">Franke, Kanzow, Leininger, and Schwartz 2014</a>) by characterizing an efficient symmetric contest which weakly dominates all others and contributes to a much larger literature on contest design.</p>
<h2>Model</h2>
<p>Suppose that the prize of contest is worth one to both players. So, the two players have the same value. However, their scores have different costs. In particular, we will say that the score is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo>></mo><mn>1</mn></mrow><annotation encoding="application/x-tex">k > 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> times more costly for Player 2 than for Player 1. You can interpret this as saying that Player 1 is more skilled. So, it takes less effort for her to produce a high score.</p>
<p>The probability of Player <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>i</mi></mrow><annotation encoding="application/x-tex">i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6595em;"></span><span class="mord mathnormal">i</span></span></span></span> winning the prize in a contest when she chooses score <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mi>i</mi></msub></mrow><annotation encoding="application/x-tex">s_i</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> and her opponent chooses score <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub></mrow><annotation encoding="application/x-tex">s_{-i}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6389em;vertical-align:-0.2083em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span></span></span></span> is:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>p</mi><mi>i</mi></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mi>i</mi></msub><mo separator="true">,</mo><msub><mi>s</mi><mrow><mo>−</mo><mi>i</mi></mrow></msub><mo stretchy="false">)</mo><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex"> p_{i}(s_i, s_{-i}).
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mathnormal mtight">i</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2083em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mord">.</span></span></span></span></span></p>
<p>The final payoffs are:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>U</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>=</mo><msub><mi>p</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>−</mo><msub><mi>s</mi><mn>1</mn></msub></mrow><annotation encoding="application/x-tex"> U_1(s_1, s_2) = p_1 (s_1, s_2) - s_1
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span></span></p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>U</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>=</mo><msub><mi>p</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>2</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">)</mo><mo>−</mo><mi>k</mi><msub><mi>s</mi><mn>2</mn></msub><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex"> U_2(s_1, s_2) = p_2 (s_2, s_1) - k s_2.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.8444em;vertical-align:-0.15em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mord">.</span></span></span></span></span></p>
<p>We define two notions of “fairness” that are central to our analysis:</p>
<ul>
<li>A contest satisfies <em>efficiency</em> iff <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>p</mi><mn>1</mn></msub><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>+</mo><msub><mi>p</mi><mn>2</mn></msub><mo stretchy="false">(</mo><mi>y</mi><mo separator="true">,</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">p_1 (x, y) + p_2 (y, x) = 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo>≥</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">x,y \geq 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8304em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.</li>
<li>A contest satisfies <em>symmetry</em> iff <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>p</mi><mn>1</mn></msub><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>=</mo><msub><mi>p</mi><mn>2</mn></msub><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">p_1 (x, y) = p_2 (x, y)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span></span></span></span> for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo>≥</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">x,y \geq 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8304em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.</li>
</ul>
<p>Efficiency means that someone is always a winner. Symmetry means that both players are treated the same by the designer. We will see that these conditions do not individually constrain the designer’s revenue. However, when the two conditions are imposed together, the designer is meaningfully constrained.</p>
<p>Note that these conditions jointly imply <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>p</mi><mi>i</mi></msub><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><mn>0.5</mn></mrow><annotation encoding="application/x-tex">p_i(x,x) = 0.5</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3117em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">i</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0.5</span></span></span></span>.</p>
<h2>Contest design</h2>
<p>Suppose that there is some contest designer who can choose <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>p</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>p</mi><mn>2</mn></msub></mrow><annotation encoding="application/x-tex">p_1, p_2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span> in order to maximize the expected revenue, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo>+</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">E[s_1 + s_2]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span> given the (possibly mixed) strategies of the players. If strategies are pure, then the revenue is deterministic. Note that incentive compatibility implies</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo>+</mo><mi>k</mi><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo><mo>≤</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>p</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>+</mo><msub><mi>p</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>2</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">)</mo><mo stretchy="false">]</mo><mo>≤</mo><mn>1.</mn></mrow><annotation encoding="application/x-tex"> E[s_1 + k s_2] \leq E[p_1 (s_1, s_2) + p_2 (s_2, s_1)] \leq 1.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1.</span></span></span></span></span></p>
<p>Therefore, expected revenue is bound above by <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mn>1</mn><mo>−</mo><mo stretchy="false">(</mo><mi>k</mi><mo>−</mo><mn>1</mn><mo stretchy="false">)</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">1 - (k - 1) E[s_2]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7278em;vertical-align:-0.0833em;"></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">1</span><span class="mclose">)</span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span> and the first best is achieved iff <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>1</mn></msub><mo>=</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">s_1 = 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>2</mn></msub><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">s_2 = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.<sup class="footnote-ref"><a href="https://www.matthewthom.as/blog/optimal-fair-contests/#fn1" id="fnref1">[1]</a></sup> We can immediately see that no contest which satisfies both symmetry and efficiency will achieve the first best. This is because both players receive a payoff of zero in the first best, but Player 1 can choose zero instead of one to receive a payoff of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi><mo stretchy="false">(</mo><mn>0</mn><mo separator="true">,</mo><mn>0</mn><mo stretchy="false">)</mo><mo>=</mo><mn>0.5</mn></mrow><annotation encoding="application/x-tex">p(0,0) = 0.5</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0.5</span></span></span></span>.</p>
<h3>Reserve bid</h3>
<p>If we allow for a reserve bid, but still enforce symmetry, is is easy for the designer to achieve the first best. For example, the following all-pay auction with a reserve bid achieves the first best:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>p</mi><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>0</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo><</mo><mi>max</mi><mo></mo><mo stretchy="false">(</mo><mi>y</mi><mo separator="true">,</mo><mn>1</mn><mo stretchy="false">)</mo></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mfrac><mn>1</mn><mn>2</mn></mfrac></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>≥</mo><mn>1</mn><mo separator="true">,</mo><mi>x</mi><mo>=</mo><mi>y</mi></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>1</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>≥</mo><mn>1</mn><mo separator="true">,</mo><mi>x</mi><mo>></mo><mi>y</mi><mi mathvariant="normal">.</mi></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex"> p(x, y) =
\begin{cases}
0 &\text{if } x < \max(y,1) \\
\frac{1}{2} &\text{if } x \geq 1, x=y \\
1 &\text{if } x \geq 1, x > y.
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:4.32em;vertical-align:-1.91em;"></span><span class="minner"><span class="mopen"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.35em;"><span style="top:-2.2em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎩</span></span></span><span style="top:-2.192em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-3.15em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎨</span></span></span><span style="top:-4.292em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-4.6em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎧</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.85em;"><span></span></span></span></span></span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">0</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mop">max</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span><span class="mclose">)</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mord">.</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>This is because Player 1 is willing to meet the reserve bid of 1 and Player 2 is not.</p>
<p>One might wonder if the designer can still extract the full surplus with a smaller reserve bid. The answer is yes. In fact, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi><mo stretchy="false">(</mo><mn>0</mn><mo separator="true">,</mo><mn>0</mn><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">p(0,0) = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">0</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> is sufficient for the first best to be attainable under symmetry. That is, the designer need only be able to withhold the prize when both players play zero. To see this, consider the following contest which satisfies both properties except at zero.</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>p</mi><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>1</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>−</mo><mi>y</mi><mo>></mo><mn>1</mn></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mi>x</mi><mo>−</mo><mi>y</mi></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>−</mo><mi>y</mi><mo>∈</mo><mo stretchy="false">(</mo><mn>0</mn><mo separator="true">,</mo><mn>1</mn><mo stretchy="false">]</mo></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>0</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>=</mo><mi>y</mi><mo>=</mo><mn>0</mn></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mfrac><mn>1</mn><mn>2</mn></mfrac></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>=</mo><mi>y</mi><mo mathvariant="normal">≠</mo><mn>0</mn></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mn>1</mn><mo>+</mo><mi>x</mi><mo>−</mo><mi>y</mi></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>−</mo><mi>y</mi><mo><</mo><mn>0.</mn></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex"> p(x,y) =
\begin{cases}
1 &\text{if } x-y >1 \\
x-y &\text{if } x-y \in(0,1] \\
0 &\text{if } x = y = 0 \\
\frac{1}{2} &\text{if } x=y \neq 0 \\
1+x-y &\text{if } x-y <0.
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:7.2em;vertical-align:-3.35em;"></span><span class="minner"><span class="mopen"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:3.85em;"><span style="top:-1.366em;"><span class="pstrut" style="height:3.816em;"></span><span class="delimsizinginner delim-size4"><span>⎩</span></span></span><span style="top:-1.358em;"><span class="pstrut" style="height:3.816em;"></span><span style="height:1.816em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="1.816em" style="width:0.8889em" viewBox="0 0 888.89 1816" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V1816 H384z M384 0 H504 V1816 H384z"></path></svg></span></span><span style="top:-3.816em;"><span class="pstrut" style="height:3.816em;"></span><span class="delimsizinginner delim-size4"><span>⎨</span></span></span><span style="top:-4.958em;"><span class="pstrut" style="height:3.816em;"></span><span style="height:1.816em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="1.816em" style="width:0.8889em" viewBox="0 0 888.89 1816" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V1816 H384z M384 0 H504 V1816 H384z"></path></svg></span></span><span style="top:-6.766em;"><span class="pstrut" style="height:3.816em;"></span><span class="delimsizinginner delim-size4"><span>⎧</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.35em;"><span></span></span></span></span></span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:3.85em;"><span style="top:-5.85em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">1</span></span></span><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">0</span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-0.09em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.35em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:3.85em;"><span style="top:-5.85em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span></span></span><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mopen">(</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span><span class="mclose">]</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">0</span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><span class="mrel"><span class="mord vbox"><span class="thinbox"><span class="rlap"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="inner"><span class="mord"><span class="mrel"></span></span></span><span class="fix"></span></span></span></span></span><span class="mrel">=</span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">0</span></span></span><span style="top:-0.09em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">0.</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.35em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>This contest has an equilibrium at the first best yet only denies the prize to players when they both exert no effort.</p>
<h3>Direct discrimination</h3>
<p>Direct discrimination is similar to a reserve bid. It is possible to mimic any reserve bid through direct discrimination by promising the prize to the weaker player whenever the reserve is not met. In particular, take either example from the previous section and set <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>p</mi><mn>1</mn></msub><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>=</mo><mi>p</mi><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">p_1(x,y) = p(x,y)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>p</mi><mn>2</mn></msub><mo stretchy="false">(</mo><mi>y</mi><mo separator="true">,</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><mn>1</mn><mo>−</mo><mi>p</mi><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">p_2(y,x) = 1 - p(x,y)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7278em;vertical-align:-0.0833em;"></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span></span></span></span>. Such a contest is efficient and will be strategically equivalent to the original contest. For example, consider the aforementioned all-pay auction with a reserve bid. With this transformation,</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>p</mi><mn>1</mn></msub><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>0</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo><</mo><mi>max</mi><mo></mo><mo stretchy="false">(</mo><mi>y</mi><mo separator="true">,</mo><mn>1</mn><mo stretchy="false">)</mo></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mfrac><mn>1</mn><mn>2</mn></mfrac></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>≥</mo><mn>1</mn><mo separator="true">,</mo><mi>x</mi><mo>=</mo><mi>y</mi></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>1</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>≥</mo><mn>1</mn><mo separator="true">,</mo><mi>x</mi><mo>></mo><mi>y</mi></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex"> p_1(x, y) =
\begin{cases}
0 &\text{if } x < \max(y,1) \\
\frac{1}{2} &\text{if } x \geq 1, x=y \\
1 &\text{if } x \geq 1, x > y
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:4.32em;vertical-align:-1.91em;"></span><span class="minner"><span class="mopen"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.35em;"><span style="top:-2.2em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎩</span></span></span><span style="top:-2.192em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-3.15em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎨</span></span></span><span style="top:-4.292em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-4.6em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎧</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.85em;"><span></span></span></span></span></span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">0</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mop">max</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span><span class="mclose">)</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msub><mi>p</mi><mn>2</mn></msub><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>0</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>y</mi><mo>≥</mo><mn>1</mn><mo separator="true">,</mo><mi>y</mi><mo>></mo><mi>x</mi></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mfrac><mn>1</mn><mn>2</mn></mfrac></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>y</mi><mo>≥</mo><mn>1</mn><mo separator="true">,</mo><mi>x</mi><mo>=</mo><mi>y</mi></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>1</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>y</mi><mo><</mo><mi>max</mi><mo></mo><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mn>1</mn><mo stretchy="false">)</mo><mi mathvariant="normal">.</mi></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex"> p_2(x, y) =
\begin{cases}
0 &\text{if } y \geq 1, y > x \\
\frac{1}{2} &\text{if } y \geq 1, x=y \\
1 &\text{if } y < \max(x,1).
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">p</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:4.32em;vertical-align:-1.91em;"></span><span class="minner"><span class="mopen"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.35em;"><span style="top:-2.2em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎩</span></span></span><span style="top:-2.192em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-3.15em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎨</span></span></span><span style="top:-4.292em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-4.6em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎧</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.85em;"><span></span></span></span></span></span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">0</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal">x</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mop">max</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span><span class="mclose">)</span><span class="mord">.</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>This contest has an equilibrium at the first best.</p>
<h3>“Fair” design</h3>
<p>We now restrict the principal to use an efficient symmetric contest. In equilibrium, each Player must weakly prefer her equilibrium payoff over copying the strategy of her opponent. Therefore, the following weak incentive compatibility condition is necessary for equilibrium:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mfrac><mn>1</mn><mn>2</mn></mfrac><mo>−</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo><mo>≤</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>U</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo stretchy="false">]</mo><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex"> \frac{1}{2} - E[s_2] \leq E[U_1(s_1, s_2)].
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.0074em;vertical-align:-0.686em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)]</span><span class="mord">.</span></span></span></span></span></p>
<p>Together with <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>U</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo stretchy="false">]</mo><mo>≥</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">E[U_2(s_1, s_2)] \geq 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> this implies</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable rowspacing="0.25em" columnalign="right left" columnspacing="0em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mfrac><mn>1</mn><mn>2</mn></mfrac><mo>−</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>≤</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>U</mi><mn>1</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>+</mo><msub><mi>U</mi><mn>2</mn></msub><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo stretchy="false">]</mo></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mfrac><mn>1</mn><mn>2</mn></mfrac><mo>−</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>≤</mo><mn>1</mn><mo>−</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo>+</mo><mi>k</mi><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd></mtr></mtable><annotation encoding="application/x-tex"> \begin{aligned}
\frac{1}{2} - E[s_2] &\leq E[U_1(s_1, s_2) + U_2(s_1, s_2)] \\
\frac{1}{2} - E[s_2] &\leq 1 - E[s_1 + k s_2]
\end{aligned}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:4.6149em;vertical-align:-2.0574em;"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.5574em;"><span style="top:-4.5574em;"><span class="pstrut" style="height:3.3214em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span><span style="top:-2.25em;"><span class="pstrut" style="height:3.3214em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.0574em;"><span></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.5574em;"><span style="top:-4.5574em;"><span class="pstrut" style="height:3.3214em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10903em;">U</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.109em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)]</span></span></span><span style="top:-2.25em;"><span class="pstrut" style="height:3.3214em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">1</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.0574em;"><span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>where the last line follows from efficiency. Rearranging this equation gives an upper bound on the revenue:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo>+</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo><mo>≤</mo><mfrac><mn>1</mn><mn>2</mn></mfrac><mo>+</mo><mo stretchy="false">(</mo><mn>2</mn><mo>−</mo><mi>k</mi><mo stretchy="false">)</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex"> E[s_1 + s_2] \leq \frac{1}{2} + (2 - k) E[s_2]
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.0074em;vertical-align:-0.686em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">2</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose">)</span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span></span></p>
<p>which can be further bounded by</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo>+</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo><mo>≤</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mfrac><mn>1</mn><mi>k</mi></mfrac></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>k</mi><mo><</mo><mn>2</mn></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mfrac><mn>1</mn><mn>2</mn></mfrac></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>k</mi><mo>≥</mo><mn>2.</mn></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex"> E[s_1 + s_2] \leq
\begin{cases}
\frac{1}{k} &\text{if } k < 2 \\
\frac{1}{2} &\text{if } k \geq 2.
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:3em;vertical-align:-1.25em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size4">{</span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.69em;"><span style="top:-3.69em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-2.25em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.19em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.69em;"><span style="top:-3.69em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">2</span></span></span><span style="top:-2.25em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">2.</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.19em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>I show by construction that this upper bound is tight. That is, there exist optimal contests which achieve these bounds.</p>
<p>The second bound comes from the fact that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo><mo>≤</mo><mfrac><mn>1</mn><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">E[s_2] \leq \frac{1}{2k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span> because Player 2 cannot win with probability more than one half. To see this, consider that the following two conditions must hold in equilibrium</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable rowspacing="0.25em" columnalign="right left" columnspacing="0em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mfrac><mn>1</mn><mn>2</mn></mfrac><mo>−</mo><mi>k</mi><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>≤</mo><mi>E</mi><mo stretchy="false">[</mo><mi>p</mi><mo stretchy="false">(</mo><msub><mi>s</mi><mn>2</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">)</mo><mo>−</mo><mi>k</mi><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>≤</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">]</mo><mo>+</mo><mo stretchy="false">(</mo><mi>k</mi><msup><mo stretchy="false">)</mo><mrow><mo>−</mo><mn>1</mn></mrow></msup><mrow><mo fence="true">(</mo><mi>E</mi><mo stretchy="false">[</mo><mi>p</mi><mo stretchy="false">(</mo><msub><mi>s</mi><mn>2</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">)</mo><mo stretchy="false">]</mo><mo>−</mo><mfrac><mn>1</mn><mn>2</mn></mfrac><mo fence="true">)</mo></mrow></mrow></mstyle></mtd></mtr></mtable><annotation encoding="application/x-tex"> \begin{aligned}
\frac{1}{2} - k E[s_1] &\leq E[p(s_2, s_1) - k s_2] \\
E[s_2] &\leq E[s_1] + (k)^{-1} \left(E[p(s_2, s_1)] - \frac{1}{2}\right)
\end{aligned}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:5.0075em;vertical-align:-2.2537em;"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.7537em;"><span style="top:-4.8823em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span><span style="top:-2.4463em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.2537em;"><span></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.7537em;"><span style="top:-4.8823em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span><span style="top:-2.4463em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8641em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">−</span><span class="mord mtight">1</span></span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)]</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.2537em;"><span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>and</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable rowspacing="0.25em" columnalign="right left" columnspacing="0em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mfrac><mn>1</mn><mn>2</mn></mfrac><mo>−</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>≤</mo><mi>E</mi><mo stretchy="false">[</mo><mi>p</mi><mo stretchy="false">(</mo><msub><mi>s</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">)</mo><mo>−</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>2</mn></msub><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>≥</mo><mi>E</mi><mo stretchy="false">[</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">]</mo><mo>+</mo><mrow><mo fence="true">(</mo><mi>E</mi><mo stretchy="false">[</mo><mi>p</mi><mo stretchy="false">(</mo><msub><mi>s</mi><mn>2</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">)</mo><mo stretchy="false">]</mo><mo>−</mo><mfrac><mn>1</mn><mn>2</mn></mfrac><mo fence="true">)</mo></mrow></mrow></mstyle></mtd></mtr></mtable><annotation encoding="application/x-tex"> \begin{aligned}
\frac{1}{2} - E[s_2] &\leq E[p(s_1, s_2) - s_1] \\
E[s_2] &\geq E[s_1] + \left(E[p(s_2, s_1)] - \frac{1}{2}\right)
\end{aligned}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:5.0075em;vertical-align:-2.2537em;"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.7537em;"><span style="top:-4.8823em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span><span style="top:-2.4463em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.2537em;"><span></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.7537em;"><span style="top:-4.8823em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span></span></span><span style="top:-2.4463em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">(</span></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)]</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3214em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">)</span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:2.2537em;"><span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>which imply <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>E</mi><mo stretchy="false">[</mo><mi>p</mi><mo stretchy="false">(</mo><msub><mi>s</mi><mn>2</mn></msub><mo separator="true">,</mo><msub><mi>s</mi><mn>1</mn></msub><mo stretchy="false">)</mo><mo stretchy="false">]</mo><mo>≤</mo><mfrac><mn>1</mn><mn>2</mn></mfrac></mrow><annotation encoding="application/x-tex">E[p(s_2, s_1)] \leq \frac{1}{2}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.05764em;">E</span><span class="mopen">[</span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>.</p>
<p><em>Case 1:</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo><</mo><mn>2</mn></mrow><annotation encoding="application/x-tex">k < 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>. This means that revenue cannot exceed <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mn>1</mn><mi>k</mi></mfrac></mrow><annotation encoding="application/x-tex">\frac{1}{k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span>. We can reach this upper bound with an all-pay auction with a bid cap at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mn>1</mn><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">\frac{1}{2k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span> as in <a href="https://econpapers.repec.org/RePEc:aea:aecrev:v:88:y:1998:i:3:p:643-51">Che and Gale (1998)</a>. That is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>p</mi><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>1</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mfrac><mn>1</mn><mrow><mn>2</mn><mi>k</mi></mrow></mfrac><mo>≥</mo><mi>x</mi><mo>></mo><mi>y</mi><mtext> or </mtext><mi>y</mi><mo>></mo><mfrac><mn>1</mn><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mfrac><mn>1</mn><mn>2</mn></mfrac></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>=</mo><mi>y</mi></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>0</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mfrac><mn>1</mn><mrow><mn>2</mn><mi>k</mi></mrow></mfrac><mo>≥</mo><mi>y</mi><mo>></mo><mi>x</mi><mtext> or </mtext><mi>x</mi><mo>></mo><mfrac><mn>1</mn><mrow><mn>2</mn><mi>k</mi></mrow></mfrac><mi mathvariant="normal">.</mi></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex"> p(x,y) =
\begin{cases}
1 &\text{if } \frac{1}{2k} \geq x > y \text{ or } y > \frac{1}{2k} \\
\frac{1}{2} &\text{if } x=y \\
0 &\text{if } \frac{1}{2k} \geq y > x \text{ or } x > \frac{1}{2k}.
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:4.32em;vertical-align:-1.91em;"></span><span class="minner"><span class="mopen"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.35em;"><span style="top:-2.2em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎩</span></span></span><span style="top:-2.192em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-3.15em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎨</span></span></span><span style="top:-4.292em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-4.6em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎧</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.85em;"><span></span></span></span></span></span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">1</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">0</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mord text"><span class="mord"> or </span></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord mathnormal">x</span><span class="mord text"><span class="mord"> or </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord">.</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>This has an equilibrium at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>1</mn></msub><mo>=</mo><msub><mi>s</mi><mn>2</mn></msub><mo>=</mo><mfrac><mn>1</mn><mrow><mn>2</mn><mi>k</mi></mrow></mfrac></mrow><annotation encoding="application/x-tex">s_1 = s_2 = \frac{1}{2k}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span><span class="mord mathnormal mtight" style="margin-right:0.03148em;">k</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span> which achieves the upper bound for <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo><</mo><mn>2</mn></mrow><annotation encoding="application/x-tex">k < 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7335em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>.</p>
<p><em>Case 2:</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo>≥</mo><mn>2</mn></mrow><annotation encoding="application/x-tex">k \geq 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8304em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>. The above implies that revenue cannot exceed one half. Consider the following difference form contest as in <a href="https://econpapers.repec.org/RePEc:eee:gamebe:v:30:y:2000:i:1:p:22-43">Che and Gale (2000)</a>:</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>p</mi><mo stretchy="false">(</mo><mi>x</mi><mo separator="true">,</mo><mi>y</mi><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>1</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>−</mo><mi>y</mi><mo>></mo><mfrac><mn>1</mn><mn>2</mn></mfrac></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mfrac><mn>1</mn><mn>2</mn></mfrac><mo>+</mo><mi>x</mi><mo>−</mo><mi>y</mi></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>−</mo><mi>y</mi><mo>∈</mo><mrow><mo fence="true">[</mo><mo>−</mo><mfrac><mn>1</mn><mn>2</mn></mfrac><mo separator="true">,</mo><mfrac><mn>1</mn><mn>2</mn></mfrac><mo fence="true">]</mo></mrow></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>0</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext>if </mtext><mi>x</mi><mo>−</mo><mi>y</mi><mo><</mo><mo>−</mo><mfrac><mn>1</mn><mn>2</mn></mfrac></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex"> p(x,y) =
\begin{cases}
1 &\text{if } x-y > \frac{1}{2} \\
\frac{1}{2} + x-y &\text{if } x-y \in \left[-\frac{1}{2},\frac{1}{2}\right] \\
0 &\text{if } x-y < - \frac{1}{2}
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:4.32em;vertical-align:-1.91em;"></span><span class="minner"><span class="mopen"><span class="delimsizing mult"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.35em;"><span style="top:-2.2em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎩</span></span></span><span style="top:-2.192em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-3.15em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎨</span></span></span><span style="top:-4.292em;"><span class="pstrut" style="height:3.15em;"></span><span style="height:0.316em;width:0.8889em;"><svg xmlns="http://www.w3.org/2000/svg" width="0.8889em" height="0.316em" style="width:0.8889em" viewBox="0 0 888.89 316" preserveAspectRatio="xMinYMin"><path d="M384 0 H504 V316 H384z M384 0 H504 V316 H384z"></path></svg></span></span><span style="top:-4.6em;"><span class="pstrut" style="height:3.15em;"></span><span class="delimsizinginner delim-size4"><span>⎧</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.85em;"><span></span></span></span></span></span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">1</span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">0</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:2.41em;"><span style="top:-4.41em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span><span style="top:-2.97em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size1">[</span></span><span class="mord">−</span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size1">]</span></span></span></span></span><span style="top:-1.53em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord">if </span></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">y</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">−</span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.91em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>The above contest has an equilibrium at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>1</mn></msub><mo>=</mo><mfrac><mn>1</mn><mn>2</mn></mfrac></mrow><annotation encoding="application/x-tex">s_1 = \frac{1}{2}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1901em;vertical-align:-0.345em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.8451em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">2</span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.394em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.345em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msub><mi>s</mi><mn>2</mn></msub><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">s_2 = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5806em;vertical-align:-0.15em;"></span><span class="mord"><span class="mord mathnormal">s</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> which achieves the upper bound for <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>k</mi><mo>≥</mo><mn>2</mn></mrow><annotation encoding="application/x-tex">k \geq 2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8304em;vertical-align:-0.136em;"></span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≥</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">2</span></span></span></span>.</p>
<hr>
<hr class="footnotes-sep">
<section class="footnotes">
<ol class="footnotes-list">
<li id="fn1" class="footnote-item"><p>Note that these strategies must be pure because no mixed strategy can have expectation zero and no individually rational mixed strategy can have expectation one. <a href="https://www.matthewthom.as/blog/optimal-fair-contests/#fnref1" class="footnote-backref">↩︎</a></p>
</li>
</ol>
</section>
Optimization of Functionals and the Calculus of Variations
2022-02-12T00:00:00Z
https://www.matthewthom.as/blog/functional-optimization/
<p>There are many settings in Economics, particularly in mechanism design, where one wants to fund a function that maximizes (or minimizes) some objective. It turns out this works similarly to regular calculus.</p>
<h2>Motivation</h2>
<p>Consider the expected revenue of a mechanism designed to sell a good to one agent who’s value of the good is distributed uniformly with support <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mn>1</mn><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">[ 0, 1 ]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span><span class="mclose">]</span></span></span></span>. This expected revenue is known to be</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>R</mi><mo stretchy="false">[</mo><mi>p</mi><mo stretchy="false">]</mo><mo>=</mo><msubsup><mo>∫</mo><mn>0</mn><mn>1</mn></msubsup><mi>p</mi><mo stretchy="false">(</mo><mi>v</mi><mo stretchy="false">)</mo><mo stretchy="false">(</mo><mn>2</mn><mi>v</mi><mo>−</mo><mn>1</mn><mo stretchy="false">)</mo><mtext> </mtext><mi>d</mi><mi>v</mi></mrow><annotation encoding="application/x-tex">R[p] = \int_0^1 p(v) (2 v - 1)\, dv
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.00773em;">R</span><span class="mopen">[</span><span class="mord mathnormal">p</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.476em;vertical-align:-0.9119em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.564em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mclose">)</span><span class="mopen">(</span><span class="mord">2</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">1</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi><mo stretchy="false">(</mo><mi>v</mi><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">p(v)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mclose">)</span></span></span></span> is a function that determines the probability of selling the good to the agent when her value is <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>v</mi></mrow><annotation encoding="application/x-tex">v</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.4306em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mn>2</mn><mi>v</mi><mo>−</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">2 v - 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7278em;vertical-align:-0.0833em;"></span><span class="mord">2</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span> is the <em>virtual surplus</em>. The above equation, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>R</mi><mo stretchy="false">[</mo><mi>p</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">R[p]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.00773em;">R</span><span class="mopen">[</span><span class="mord mathnormal">p</span><span class="mclose">]</span></span></span></span>, is a <em>functional</em> of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi></mrow><annotation encoding="application/x-tex">p</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">p</span></span></span></span>. That is, it maps the function <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi></mrow><annotation encoding="application/x-tex">p</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">p</span></span></span></span> to a real number. Suppose that you wanted to find the revenue maximizing mechanism <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi></mrow><annotation encoding="application/x-tex">p</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">p</span></span></span></span>. Then, the problem you want to solve is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><munder><mrow><mi>max</mi><mo></mo></mrow><mi>p</mi></munder><msubsup><mo>∫</mo><mn>0</mn><mn>1</mn></msubsup><mi>p</mi><mo stretchy="false">(</mo><mi>v</mi><mo stretchy="false">)</mo><mo stretchy="false">(</mo><mn>2</mn><mi>v</mi><mo>−</mo><mn>1</mn><mo stretchy="false">)</mo><mtext> </mtext><mi>d</mi><mi>v</mi></mrow><annotation encoding="application/x-tex">\max_p \int_0^1 p(v) (2 v - 1)\, dv
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.476em;vertical-align:-0.9119em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.4306em;"><span style="top:-2.4em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">p</span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">max</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.8361em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.564em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mclose">)</span><span class="mopen">(</span><span class="mord">2</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">1</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">d</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span></span></span></span></span></p>
<p>subject to <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mn>0</mn><mo>≤</mo><mi>p</mi><mo stretchy="false">(</mo><mi>v</mi><mo stretchy="false">)</mo><mo>≤</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">0 \leq p(v) \leq 1</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7804em;vertical-align:-0.136em;"></span><span class="mord">0</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">≤</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span>. If you look at this problem closely, you will note that the optimal function must be</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>p</mi><mo stretchy="false">(</mo><mi>v</mi><mo stretchy="false">)</mo><mo>=</mo><mrow><mo fence="true">{</mo><mtable rowspacing="0.36em" columnalign="left left" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>0</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext> if </mtext><mi>v</mi><mo><</mo><mn>0.5</mn></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mn>1</mn></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mtext> if </mtext><mi>v</mi><mo>></mo><mn>0.5</mn></mrow></mstyle></mtd></mtr></mtable></mrow></mrow><annotation encoding="application/x-tex">p(v) =
\begin{cases}
0 &\text{ if } v < 0.5 \\
1 &\text{ if } v > 0.5
\end{cases}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">p</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:3em;vertical-align:-1.25em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size4">{</span></span><span class="mord"><span class="mtable"><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.69em;"><span style="top:-3.69em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">0</span></span></span><span style="top:-2.25em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.19em;"><span></span></span></span></span></span><span class="arraycolsep" style="width:1em;"></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.69em;"><span style="top:-3.69em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord"> if </span></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">0.5</span></span></span><span style="top:-2.25em;"><span class="pstrut" style="height:3.008em;"></span><span class="mord"><span class="mord text"><span class="mord"> if </span></span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">0.5</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:1.19em;"><span></span></span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p>
<p>where the value at one half does not matter. This is because <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi></mrow><annotation encoding="application/x-tex">p</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">p</span></span></span></span> is multiplied by some “slope”. When the slope is positive, we want <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi></mrow><annotation encoding="application/x-tex">p</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">p</span></span></span></span> to be as large as possible. When the slope is negative, we want <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>p</mi></mrow><annotation encoding="application/x-tex">p</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">p</span></span></span></span> to be as small as possible. Indeed, the <em>functional derivative</em> of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>R</mi><mo stretchy="false">[</mo><mi>p</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">R[p]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.00773em;">R</span><span class="mopen">[</span><span class="mord mathnormal">p</span><span class="mclose">]</span></span></span></span> is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mfrac><mrow><mi>δ</mi><mi>R</mi></mrow><mrow><mi>δ</mi><mi>p</mi></mrow></mfrac><mo stretchy="false">(</mo><mi>v</mi><mo stretchy="false">)</mo><mo>=</mo><mn>2</mn><mi>v</mi><mo>−</mo><mn>1</mn></mrow><annotation encoding="application/x-tex">\frac{\delta R}{\delta p}(v) = 2v - 1
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.2519em;vertical-align:-0.8804em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3714em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord mathnormal">p</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord mathnormal" style="margin-right:0.00773em;">R</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.8804em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7278em;vertical-align:-0.0833em;"></span><span class="mord">2</span><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">1</span></span></span></span></span></p>
<p>We will see that the functional derivative formalizes our intuition about this slope. It will allow us to solve optimization problems that are nonlinear.</p>
<h2>On the reals</h2>
<p>Optimization over function spaces is a natural extension of optimization over the reals. So, it’s important to remember exactly how optimization works on functions of real vectors. Consider the following function <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo>:</mo><msup><mi mathvariant="double-struck">R</mi><mi>N</mi></msup><mo>→</mo><mi mathvariant="double-struck">R</mi></mrow><annotation encoding="application/x-tex">g : \mathbb{R}^N \to \mathbb{R}</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">:</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.8413em;"></span><span class="mord"><span class="mord mathbb">R</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8413em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.10903em;">N</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">→</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6889em;"></span><span class="mord mathbb">R</span></span></span></span>.</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>X</mi><mo stretchy="false">)</mo><mo>=</mo><mo stretchy="false">(</mo><msub><mi>x</mi><mn>1</mn></msub><msup><mo stretchy="false">)</mo><mn>2</mn></msup><mo>+</mo><mo stretchy="false">(</mo><msub><mi>x</mi><mn>2</mn></msub><msup><mo stretchy="false">)</mo><mn>2</mn></msup></mrow><annotation encoding="application/x-tex"> g(X) = (x_1)^2 + (x_2)^2
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1.1141em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8641em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1.1141em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8641em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>where <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>X</mi><mo>=</mo><mo stretchy="false">(</mo><msub><mi>x</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>x</mi><mn>2</mn></msub><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">X = (x_1, x_2)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span></span></span></span>. The directional derivative in the direction <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>V</mi><mo>=</mo><mo stretchy="false">(</mo><msub><mi>v</mi><mn>1</mn></msub><mo separator="true">,</mo><msub><mi>v</mi><mn>2</mn></msub><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">V = (v_1, v_2)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">v</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mclose">)</span></span></span></span> is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable rowspacing="0.25em" columnalign="right left" columnspacing="0em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mi>d</mi><msub><mi>g</mi><mi>V</mi></msub><mo stretchy="false">(</mo><mi>X</mi><mo stretchy="false">)</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><munder><mrow><mi>lim</mi><mo></mo></mrow><mrow><mi>ϵ</mi><mo>→</mo><mn>0</mn></mrow></munder><mrow><mo fence="true">[</mo><mfrac><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>X</mi><mo>+</mo><mi>ϵ</mi><mi>V</mi><mo stretchy="false">)</mo><mo>−</mo><mi>g</mi><mo stretchy="false">(</mo><mi>X</mi><mo stretchy="false">)</mo></mrow><mi>ϵ</mi></mfrac><mo fence="true">]</mo></mrow></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mi mathvariant="normal">∇</mi><mi>g</mi><mo stretchy="false">(</mo><mi>X</mi><mo stretchy="false">)</mo><mo>⋅</mo><mi>V</mi></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><mrow><mo fence="true">[</mo><mtable rowspacing="0.16em" columnalign="center" columnspacing="1em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mn>2</mn><msub><mi>x</mi><mn>1</mn></msub></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="false"><mrow><mn>2</mn><msub><mi>x</mi><mn>2</mn></msub></mrow></mstyle></mtd></mtr></mtable><mo fence="true">]</mo></mrow><mo>⋅</mo><mi>V</mi></mrow></mstyle></mtd></mtr></mtable><annotation encoding="application/x-tex">\begin{align*}
dg_V(X) &= \lim_{\epsilon \to 0} \left[ \frac{g(X + \epsilon V) - g(X)}{\epsilon} \right] \\
&= \nabla g(X) \cdot V \\
&=
\begin{bmatrix}
2 x_1 \\
2 x_2
\end{bmatrix}
\cdot V \\
\end{align*}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:6.9001em;vertical-align:-3.2em;"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:3.7em;"><span style="top:-5.7em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.22222em;">V</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="mclose">)</span></span></span><span style="top:-3.61em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"></span></span><span style="top:-1.5em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.2em;"><span></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:3.7em;"><span style="top:-5.7em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6944em;"><span style="top:-2.3829em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">ϵ</span><span class="mrel mtight">→</span><span class="mord mtight">0</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">lim</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7171em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">[</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal">ϵ</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">ϵ</span><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">]</span></span></span></span></span><span style="top:-3.61em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mord">∇</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">⋅</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.22222em;">V</span></span></span><span style="top:-1.5em;"><span class="pstrut" style="height:3.45em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">[</span></span><span class="mord"><span class="mtable"><span class="col-align-c"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.45em;"><span style="top:-3.61em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span><span style="top:-2.41em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.95em;"><span></span></span></span></span></span></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">]</span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">⋅</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal" style="margin-right:0.22222em;">V</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.2em;"><span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>If <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>X</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">X^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span> is a minimum, there cannot be a direction, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>V</mi></mrow><annotation encoding="application/x-tex">V</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.22222em;">V</span></span></span></span>, such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>d</mi><msub><mi>g</mi><mi>V</mi></msub><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo><mo><</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">dg_V(X^\star) < 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.22222em;">V</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>. This would imply that there exists an <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>ϵ</mi><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\epsilon > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">ϵ</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo>+</mo><mi>ϵ</mi><mi>V</mi><mo stretchy="false">)</mo><mo><</mo><mi>g</mi><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">g(X^\star + \epsilon V) < g(X^\star)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">ϵ</span><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span></span></span></span>. This contradicts the assumption that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>X</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">X^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span> is a minimum. In addition, there cannot be a <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>V</mi></mrow><annotation encoding="application/x-tex">V</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal" style="margin-right:0.22222em;">V</span></span></span></span> such that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>d</mi><msub><mi>g</mi><mi>V</mi></msub><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo><mo>></mo><mn>0</mn></mrow><annotation encoding="application/x-tex">dg_V(X^\star) > 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.22222em;">V</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">></span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> because his would imply <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>d</mi><msub><mi>g</mi><mrow><mo stretchy="false">(</mo><mo>−</mo><mi>V</mi><mo stretchy="false">)</mo></mrow></msub><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo><mo>=</mo><mo>−</mo><mi>d</mi><msub><mi>g</mi><mi>V</mi></msub><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo><mo><</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">dg_{(-V)}(X^\star) = - dg_{V}(X^\star) < 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.1052em;vertical-align:-0.3552em;"></span><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3448em;"><span style="top:-2.5198em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mopen mtight">(</span><span class="mord mtight">−</span><span class="mord mathnormal mtight" style="margin-right:0.22222em;">V</span><span class="mclose mtight">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.3552em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">−</span><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.22222em;">V</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel"><</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>.</p>
<p>Therefore, we know that for any <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>X</mi><mo>⋆</mo></msup></mrow><annotation encoding="application/x-tex">X^\star</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6887em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span></span></span></span>, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>d</mi><msub><mi>g</mi><mi>V</mi></msub><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">dg_V(X^\star) = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3283em;"><span style="top:-2.55em;margin-left:-0.0359em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight" style="margin-right:0.22222em;">V</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>V</mi><mo>∈</mo><msup><mi mathvariant="double-struck">R</mi><mn>2</mn></msup></mrow><annotation encoding="application/x-tex">V \in \mathbb{R}^2</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.7224em;vertical-align:-0.0391em;"></span><span class="mord mathnormal" style="margin-right:0.22222em;">V</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.8141em;"></span><span class="mord"><span class="mord mathbb">R</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span>. This is only possible if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi mathvariant="normal">∇</mi><mi>g</mi><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo><mo>=</mo><mo stretchy="false">(</mo><mn>0</mn><mo separator="true">,</mo><mn>0</mn><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">\nabla g(X^\star) = (0, 0)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">∇</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord"><span class="mord mathnormal" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">0</span><span class="mclose">)</span></span></span></span> which means <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mrow><mi mathvariant="normal">∂</mi><mi>g</mi><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo></mrow><mrow><mi mathvariant="normal">∂</mi><msub><mi>x</mi><mn>1</mn></msub></mrow></mfrac><mo>=</mo><mn>2</mn><msub><mi>x</mi><mn>1</mn></msub><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\frac{\partial g(X^\star)}{\partial x_1} = 2 x_1 = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.4644em;vertical-align:-0.4451em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0193em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight" style="margin-right:0.05556em;">∂</span><span class="mord mtight"><span class="mord mathnormal mtight">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3173em;"><span style="top:-2.357em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.143em;"><span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight" style="margin-right:0.05556em;">∂</span><span class="mord mathnormal mtight" style="margin-right:0.03588em;">g</span><span class="mopen mtight">(</span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7633em;"><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose mtight">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4451em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7944em;vertical-align:-0.15em;"></span><span class="mord">2</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> and <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mfrac><mrow><mi mathvariant="normal">∂</mi><mi>g</mi><mo stretchy="false">(</mo><msup><mi>X</mi><mo>⋆</mo></msup><mo stretchy="false">)</mo></mrow><mrow><mi mathvariant="normal">∂</mi><msub><mi>x</mi><mn>2</mn></msub></mrow></mfrac><mo>=</mo><mn>2</mn><msub><mi>x</mi><mn>2</mn></msub><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\frac{\partial g(X^\star)}{\partial x_2} = 2 x_2 = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.4644em;vertical-align:-0.4451em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.0193em;"><span style="top:-2.655em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight" style="margin-right:0.05556em;">∂</span><span class="mord mtight"><span class="mord mathnormal mtight">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3173em;"><span style="top:-2.357em;margin-left:0em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.143em;"><span></span></span></span></span></span></span></span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.485em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight" style="margin-right:0.05556em;">∂</span><span class="mord mathnormal mtight" style="margin-right:0.03588em;">g</span><span class="mopen mtight">(</span><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.07847em;">X</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.7633em;"><span style="top:-2.931em;margin-right:0.0714em;"><span class="pstrut" style="height:2.5em;"></span><span class="sizing reset-size3 size1 mtight"><span class="mbin mtight">⋆</span></span></span></span></span></span></span></span><span class="mclose mtight">)</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.4451em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.7944em;vertical-align:-0.15em;"></span><span class="mord">2</span><span class="mord"><span class="mord mathnormal">x</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3011em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.15em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span>. So, the only local stationary point is at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">(</mo><mn>0</mn><mo separator="true">,</mo><mn>0</mn><mo stretchy="false">)</mo></mrow><annotation encoding="application/x-tex">(0,0)</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">(</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">0</span><span class="mclose">)</span></span></span></span>. However, stationarity is a necessary but not sufficient condition. We would need to test for convexity to ensure that this is a minimum. Though, it obviously is.</p>
<p>Functional optimization follows the same principles.</p>
<h2>On continuous functions</h2>
<p>Suppose there is a known continuous function <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>ϕ</mi></mrow><annotation encoding="application/x-tex">\phi</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">ϕ</span></span></span></span> that we want to approximate with another continuous function using least squares on the interval <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mn>1</mn><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">[0, 1]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span><span class="mclose">]</span></span></span></span>. That is, you want to minimize the following functional</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>L</mi><mo stretchy="false">[</mo><mi>f</mi><mo stretchy="false">]</mo><mo>=</mo><msubsup><mo>∫</mo><mn>0</mn><mn>1</mn></msubsup><mo stretchy="false">(</mo><mi>f</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>−</mo><mi>ϕ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><msup><mo stretchy="false">)</mo><mn>2</mn></msup><mtext> </mtext><mi>d</mi><mi>x</mi><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex"> L[f] = \int_0^1 (f(x) - \phi(x))^2\, dx.
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">L</span><span class="mopen">[</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.476em;vertical-align:-0.9119em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.564em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1.1141em;vertical-align:-0.25em;"></span><span class="mord mathnormal">ϕ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8641em;"><span style="top:-3.113em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">d</span><span class="mord mathnormal">x</span><span class="mord">.</span></span></span></span></span></p>
<p>Of course, the minimum is going to be at <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><msup><mi>f</mi><mo>∗</mo></msup><mo>=</mo><mi>ϕ</mi></mrow><annotation encoding="application/x-tex">f^* = \phi</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.6887em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mbin mtight">∗</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">ϕ</span></span></span></span>. We will solve this by finding the Gateaux differential of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>L</mi></mrow><annotation encoding="application/x-tex">L</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">L</span></span></span></span> with respect to some direction, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>ψ</mi></mrow><annotation encoding="application/x-tex">\psi</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span></span></span></span>. This is defined in the same way as the directional derivative on the reals</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mi>d</mi><msub><mi>L</mi><mi>ψ</mi></msub><mo stretchy="false">[</mo><mi>f</mi><mo stretchy="false">]</mo><mo>=</mo><munder><mrow><mi>lim</mi><mo></mo></mrow><mrow><mi>ϵ</mi><mo>→</mo><mn>0</mn></mrow></munder><mrow><mo fence="true">[</mo><mfrac><mrow><mi>L</mi><mo stretchy="false">[</mo><mi>f</mi><mo>+</mo><mi>ϵ</mi><mi>ψ</mi><mo stretchy="false">]</mo><mo>−</mo><mi>L</mi><mo stretchy="false">[</mo><mi>f</mi><mo stretchy="false">]</mo></mrow><mi>ϵ</mi></mfrac><mo fence="true">]</mo></mrow><mi mathvariant="normal">.</mi></mrow><annotation encoding="application/x-tex"> dL_{\psi}[f] = \lim_{\epsilon \to 0} \left[ \frac{L[f + \epsilon \psi] - L[f]}{\epsilon} \right].
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.0361em;vertical-align:-0.2861em;"></span><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal">L</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3361em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">ψ</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mopen">[</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:2.4em;vertical-align:-0.95em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6944em;"><span style="top:-2.3829em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">ϵ</span><span class="mrel mtight">→</span><span class="mord mtight">0</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">lim</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7171em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">[</span></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal">ϵ</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal">L</span><span class="mopen">[</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">ϵ</span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">L</span><span class="mopen">[</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mclose">]</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">]</span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">.</span></span></span></span></span></p>
<p>So, the Gateaux differential of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>L</mi></mrow><annotation encoding="application/x-tex">L</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.6833em;"></span><span class="mord mathnormal">L</span></span></span></span> is</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mtable rowspacing="0.25em" columnalign="right left" columnspacing="0em"><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mi>d</mi><msub><mi>L</mi><mi>ψ</mi></msub><mo stretchy="false">[</mo><mi>f</mi><mo stretchy="false">]</mo></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><munder><mrow><mi>lim</mi><mo></mo></mrow><mrow><mi>ϵ</mi><mo>→</mo><mn>0</mn></mrow></munder><mrow><mo fence="true">[</mo><msubsup><mo>∫</mo><mn>0</mn><mn>1</mn></msubsup><mfrac><mrow><mo stretchy="false">(</mo><mi>f</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>+</mo><mi>ϵ</mi><mi>ψ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>−</mo><mi>ϕ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><msup><mo stretchy="false">)</mo><mn>2</mn></msup><mo>−</mo><mo stretchy="false">(</mo><mi>f</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>−</mo><mi>ϕ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><msup><mo stretchy="false">)</mo><mn>2</mn></msup></mrow><mi>ϵ</mi></mfrac><mtext> </mtext><mi>d</mi><mi>x</mi><mo fence="true">]</mo></mrow></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><munder><mrow><mi>lim</mi><mo></mo></mrow><mrow><mi>ϵ</mi><mo>→</mo><mn>0</mn></mrow></munder><mrow><mo fence="true">[</mo><msubsup><mo>∫</mo><mn>0</mn><mn>1</mn></msubsup><mfrac><mrow><mn>2</mn><mi>f</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>−</mo><mn>2</mn><mi>ϕ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>+</mo><mi>ϵ</mi><mi>ψ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo></mrow><mi>ϵ</mi></mfrac><mi>ϵ</mi><mi>ψ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mtext> </mtext><mi>d</mi><mi>x</mi><mo fence="true">]</mo></mrow></mrow></mstyle></mtd></mtr><mtr><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow></mrow></mstyle></mtd><mtd><mstyle scriptlevel="0" displaystyle="true"><mrow><mrow></mrow><mo>=</mo><msubsup><mo>∫</mo><mn>0</mn><mn>1</mn></msubsup><mn>2</mn><mo stretchy="false">(</mo><mi>f</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>−</mo><mi>ϕ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo stretchy="false">)</mo><mi>ψ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mtext> </mtext><mi>d</mi><mi>x</mi></mrow></mstyle></mtd></mtr></mtable><annotation encoding="application/x-tex">\begin{align*}
dL_{\psi}[f] &= \lim_{\epsilon \to 0} \left[ \int_0^1 \frac{ (f(x) + \epsilon \psi(x) - \phi(x))^2 - (f(x) - \phi(x))^2}{\epsilon} \, dx \right] \\
&= \lim_{\epsilon \to 0} \left[ \int_0^1 \frac{ 2f(x) - 2\phi(x) + \epsilon\psi(x)}{\epsilon} \epsilon\psi(x) \, dx \right] \\
&= \int_0^1 2 (f(x) - \phi(x)) \psi(x) \, dx\\
\end{align*}
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:8.404em;vertical-align:-3.952em;"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:4.452em;"><span style="top:-6.452em;"><span class="pstrut" style="height:3.564em;"></span><span class="mord"><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal">L</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3361em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">ψ</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mopen">[</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mclose">]</span></span></span><span style="top:-3.638em;"><span class="pstrut" style="height:3.564em;"></span><span class="mord"></span></span><span style="top:-0.8239em;"><span class="pstrut" style="height:3.564em;"></span><span class="mord"></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.952em;"><span></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:4.452em;"><span style="top:-6.452em;"><span class="pstrut" style="height:3.564em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6944em;"><span style="top:-2.3829em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">ϵ</span><span class="mrel mtight">→</span><span class="mord mtight">0</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">lim</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7171em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">[</span></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.564em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.4911em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal">ϵ</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">ϵ</span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">ϕ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">ϕ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mclose"><span class="mclose">)</span><span class="msupsub"><span class="vlist-t"><span class="vlist-r"><span class="vlist" style="height:0.8141em;"><span style="top:-3.063em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">2</span></span></span></span></span></span></span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">d</span><span class="mord mathnormal">x</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">]</span></span></span></span></span><span style="top:-3.638em;"><span class="pstrut" style="height:3.564em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mop op-limits"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.6944em;"><span style="top:-2.3829em;margin-left:0em;"><span class="pstrut" style="height:3em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">ϵ</span><span class="mrel mtight">→</span><span class="mord mtight">0</span></span></span></span><span style="top:-3em;"><span class="pstrut" style="height:3em;"></span><span><span class="mop">lim</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.7171em;"><span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="minner"><span class="mopen delimcenter" style="top:0em;"><span class="delimsizing size3">[</span></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.564em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.427em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal">ϵ</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord">2</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord">2</span><span class="mord mathnormal">ϕ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">+</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">ϵ</span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.686em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mord mathnormal">ϵ</span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">d</span><span class="mord mathnormal">x</span><span class="mclose delimcenter" style="top:0em;"><span class="delimsizing size3">]</span></span></span></span></span><span style="top:-0.8239em;"><span class="pstrut" style="height:3.564em;"></span><span class="mord"><span class="mord"></span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.564em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">0</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight">1</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">2</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mord mathnormal">ϕ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">))</span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">d</span><span class="mord mathnormal">x</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:3.952em;"><span></span></span></span></span></span></span></span></span></span></span></span></p>
<p>which is the inner product of the <em>functional derivative</em>,</p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><mfrac><mrow><mi>δ</mi><mi>L</mi></mrow><mrow><mi>δ</mi><mi>f</mi></mrow></mfrac><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><mn>2</mn><mo stretchy="false">(</mo><mi>f</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>−</mo><mi>ϕ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo stretchy="false">)</mo><mo separator="true">,</mo></mrow><annotation encoding="application/x-tex"> \frac{\delta L}{\delta f}(x) = 2 (f(x) - \phi(x)),
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.2519em;vertical-align:-0.8804em;"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.3714em;"><span style="top:-2.314em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span></span></span><span style="top:-3.23em;"><span class="pstrut" style="height:3em;"></span><span class="frac-line" style="border-bottom-width:0.04em;"></span></span><span style="top:-3.677em;"><span class="pstrut" style="height:3em;"></span><span class="mord"><span class="mord mathnormal" style="margin-right:0.03785em;">δ</span><span class="mord mathnormal">L</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.8804em;"><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">2</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">ϕ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">))</span><span class="mpunct">,</span></span></span></span></span></p>
<p>and the direction, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>ψ</mi></mrow><annotation encoding="application/x-tex">\psi</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span></span></span></span>. Like in calculus on the reals, we need this to be zero for all directions. It turns out that, just like before, we only need to set the directional derivative to zero. This is due to the following lemma.</p>
<p><strong>Fundamental lemma of calculus of variations</strong> <em>If</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi></mrow><annotation encoding="application/x-tex">g</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.625em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span></span></span></span> <em>is continuous on</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>b</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">[a,b]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">b</span><span class="mclose">]</span></span></span></span> <em>and satisfies the equality</em></p>
<p class="katex-block "><span class="katex-display"><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML" display="block"><semantics><mrow><msubsup><mo>∫</mo><mi>a</mi><mi>b</mi></msubsup><mi>g</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mi>ψ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mtext> </mtext><mi>d</mi><mi>x</mi><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex"> \int_a^b g(x) \psi(x) \, dx = 0
</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:2.511em;vertical-align:-0.9119em;"></span><span class="mop"><span class="mop op-symbol large-op" style="margin-right:0.44445em;position:relative;top:-0.0011em;">∫</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:1.599em;"><span style="top:-1.7881em;margin-left:-0.4445em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">a</span></span></span><span style="top:-3.8129em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mathnormal mtight">b</span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.9119em;"><span></span></span></span></span></span></span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">d</span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span></span></p>
<p><em>for all continuous functions</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>ψ</mi></mrow><annotation encoding="application/x-tex">\psi</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span></span></span></span> <em>such that</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>ψ</mi><mo stretchy="false">(</mo><mi>a</mi><mo stretchy="false">)</mo><mo>=</mo><mi>ψ</mi><mo stretchy="false">(</mo><mi>b</mi><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">\psi(a)=\psi(b)=0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span><span class="mopen">(</span><span class="mord mathnormal">a</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">ψ</span><span class="mopen">(</span><span class="mord mathnormal">b</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span><em>, then</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>g</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">g(x) = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> <em>for all</em> <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo>∈</mo><mo stretchy="false">[</mo><mi>a</mi><mo separator="true">,</mo><mi>b</mi><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">x \in [a,b]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord mathnormal">a</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord mathnormal">b</span><span class="mclose">]</span></span></span></span>.</p>
<p>This means that <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>d</mi><msub><mi>L</mi><mi>ψ</mi></msub><mo stretchy="false">[</mo><mi>f</mi><mo stretchy="false">]</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">dL_{\psi}[f]=0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1.0361em;vertical-align:-0.2861em;"></span><span class="mord mathnormal">d</span><span class="mord"><span class="mord mathnormal">L</span><span class="msupsub"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist" style="height:0.3361em;"><span style="top:-2.55em;margin-left:0em;margin-right:0.05em;"><span class="pstrut" style="height:2.7em;"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight" style="margin-right:0.03588em;">ψ</span></span></span></span></span><span class="vlist-s"></span></span><span class="vlist-r"><span class="vlist" style="height:0.2861em;"><span></span></span></span></span></span></span><span class="mopen">[</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mclose">]</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> if and only if <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mn>2</mn><mo stretchy="false">(</mo><mi>f</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo>−</mo><mi>ϕ</mi><mo stretchy="false">(</mo><mi>x</mi><mo stretchy="false">)</mo><mo stretchy="false">)</mo><mo>=</mo><mn>0</mn></mrow><annotation encoding="application/x-tex">2 (f(x) - \phi(x)) = 0</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">2</span><span class="mopen">(</span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">)</span><span class="mspace" style="margin-right:0.2222em;"></span><span class="mbin">−</span><span class="mspace" style="margin-right:0.2222em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord mathnormal">ϕ</span><span class="mopen">(</span><span class="mord mathnormal">x</span><span class="mclose">))</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.6444em;"></span><span class="mord">0</span></span></span></span> for all <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>x</mi><mo>∈</mo><mo stretchy="false">[</mo><mn>0</mn><mo separator="true">,</mo><mn>1</mn><mo stretchy="false">]</mo></mrow><annotation encoding="application/x-tex">x \in [0,1]</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.5782em;vertical-align:-0.0391em;"></span><span class="mord mathnormal">x</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">∈</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mopen">[</span><span class="mord">0</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">1</span><span class="mclose">]</span></span></span></span>. So, <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mi>f</mi><mo>=</mo><mi>ϕ</mi></mrow><annotation encoding="application/x-tex">f = \phi</annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal" style="margin-right:0.10764em;">f</span><span class="mspace" style="margin-right:0.2778em;"></span><span class="mrel">=</span><span class="mspace" style="margin-right:0.2778em;"></span></span><span class="base"><span class="strut" style="height:0.8889em;vertical-align:-0.1944em;"></span><span class="mord mathnormal">ϕ</span></span></span></span> as anticipated.</p>
Instructions for using Mathstodon fork of Mastodon
2023-12-30T00:00:00Z
https://www.matthewthom.as/blog/mathstodon-instructions/
<p>This is a short guide to document my experience in enabling TeX support in Mastodon by installing Christian Lawson-Perfect’s <a href="https://github.com/christianp/mastodon/tree/mathstodon-4.2">Mathstodon fork</a>. As of the time of writing, this fork is based on Mastodon 4.2.3 and there are no official installation instructions. This guide assumes that you already have a functional installation of Mastodon 4.2.3. If you do not, you should follow the <a href="https://docs.joinmastodon.org/admin/install/">Mastodon installation instructions</a>. The instructions can likely be adapted for a fresh install.</p>
<p>All steps of this guide should be run as the mastodon user. If you are not logged in as the mastodon user, you can switch with <code>sudo -su mastodon</code>.</p>
<h2>Set up MathJax assets</h2>
<p>The fork expects a custom version of MathJax to be publicly accessible from <code>/MathJax</code> on the interface domain. To set this up, we need to download MathJax and place it in the correct location. First, we need to create a directory to store the assets:</p>
<pre><code class="language-sh">mkdir -p ~/overrides/MathJax && cd ~/overrides
</code></pre>
<p>Then, download and extract the files:</p>
<pre><code class="language-sh">wget -qO- https://www.matthewthom.as/gh/bin/mathjax-custom.tar.gz | tar xzC ./MathJax
</code></pre>
<p>Finally, to make the files accessible, add the following to the https server block in your nginx config:</p>
<pre><code class="language-nginx"> location /MathJax/ {
root /home/mastodon/overrides;
add_header Cache-Control "public, max-age=14400, must-revalidate";
add_header Strict-Transport-Security "max-age=63072000; includeSubDomains";
try_files $uri =404;
}
</code></pre>
<h2>Install the fork</h2>
<p>First, we want to add the fork as a git remote and switch to the correct branch:</p>
<pre><code class="language-sh"># change to the mastodon directory
cd ~/live
# add the fork as a remote
git remote add mathstodon https://github.com/christianp/mastodon.git
# fetch the branches from the fork
git fetch mathstodon
# switch to the mathstodon-4.2 branch
git checkout mathstodon/mathstodon-4.2
</code></pre>
<p>The dependencies between the fork and main repo are the same at the time of writing, but I’d gave it a try anyway just to make sure.</p>
<pre><code class="language-sh"># ruby dependencies
bundle install
# node dependencies
yarn install --frozen-lockfile
</code></pre>
<p>Then, we need to compile the assets:</p>
<pre><code class="language-sh">RAILS_ENV=production bundle exec rails assets:precompile
</code></pre>
<p>The final step is to restart the Mastodon web service. For this, you need to exit the mastodon user and run the following command as root:</p>
<pre><code class="language-sh">systemctl restart mastodon-web
</code></pre>