Past exam of the mathematics course of the University of Cambridge 2014 iii Paper 39 1 Solution Created 2026-10-03 Updated 2026-10-06
Write and let . Player 's payoff in the proportional contest with outside effort is . When , this is strictly concave andThe best response is zero when , and otherwise is . Thus the nonnegative-effort Karush-Kuhn-Tucker conditions at a pure strategy Nash equilibrium giveFor an active player the first-order equation is . For an inactive player the derivative at zero is . Strict concavity makes these conditions sufficient as well as necessary.
If , an equilibrium cannot have just one active player: that player would win with certainty and could lower its positive effort. An all-zero profile also cannot be an equilibrium under the usual completion of proportional allocation at zero: at least one player can gain by investing an arbitrarily small amount. Consequently there are at least two active players, so every is positive. If this positivity is automatic. The allocation rule's otherwise undefined all-zero value at is therefore immaterial to the equilibrium calculation.
Let , , and use the harmonic mean . Summing the active efforts givesThe positive root supplies the total-effort formula for a proportional contest with outside effort:At this reduces to . There is also a genuine zero-active case: if , then and ; no harmonic mean of an empty family is needed.
For a fully explicit active-set rule, setThe equilibrium equation is . For , is strictly decreasing from to . For its limit at zero is , and it is strictly decreasing wherever a zero could occur. Hence the positive root is unique. Moreover , since its equation gives , and supplies an equilibrium with total effort .
Player is active exactly when , equivalently . Ordering the valuations, including ties, givesTherefore the active-set threshold for a proportional contest with outside effort isThe qualifying indices form a prefix because is decreasing. Equality excludes the marginal player, as required by strict positivity of effort. Equivalently, the positive root of the displayed quadratic must satisfy , with . These formulas include one active player when and exclude that case when .