ASYMMETRY AND COLLUSION IN INFINITELY REPEATED CONTESTS

I show that in an infinitely repeated contest, collusion is easier to sustain when the players are more equal than when they are less equal. Therefore, aggregate rent-seeking expenditures may be lower when the contestants are more equally matched. This is in sharp contrast to the standard result in static rent-seeking contests where increasing asymmetries between players reduce aggregate expenditures. I also discuss how this result has implications for signaling in contests with incomplete information.