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Abstract
Economists often seek to align individual rationality with social efficiency — that is, to achieve convergence between the Nash equilibrium and the social optimum. Building on Chapter 1, which identified the network structure that maximizes total player effort, this chapter examines whether that same network constitutes a Nash equilibrium with respect to contest participation.
Our analysis reveals a divergence between the two: while the socially efficient network maximizes aggregate effort, individual players retain incentives to deviate in pursuit of higher personal payoffs. This finding illustrates the classic tension between collective optimality and strategic stability in network games, and highlights the challenges contest designers face when trying to align individual incentives with socially desirable outcomes.
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