Contests With Stochastic Abilities
Abstract"We consider the properties of perfectly discriminating contests in which players' abilities are stochastic, but become common knowledge before efforts are expended. Players whose expected ability is lower than that of their rivals may still earn a positive expected payoff from participating in the contest, which may explain why they participate. We also show that an increase in the dispersion of a player's own ability generally benefits this player. It may benefit or harm his rival but cannot benefit the rival more than it benefits himself. We also explore the role of stochastic ability for sequential contests with the same opponent (multibattle contests) and with varying opponents (elimination tournaments) and show that it reduces the strong discouragement effects and holdup problems that may otherwise emerge in such games. High own ability dispersion selects such players into the contest and favors them in elimination contests." ("JEL" D72, D74) Copyright (c) 2008 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 48 (2010)
Issue (Month): 1 (01)
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- Kosmas Marinakis & Theofanis Tsoulouhas, 2006.
"Are Tournaments Optimal over Piece Rates under Limited Liability for the Principal?,"
Working Paper Series
009, North Carolina State University, Department of Economics, revised Sep 2006.
- Marinakis, Kosmas & Tsoulouhas, Theofanis, 2013. "Are tournaments optimal over piece rates under limited liability for the principal?," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 223-237.
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- Martin Grossmann, 2011. "Endogenous Liquidity Constraints in a Dynamic Contest," Working Papers 0148, University of Zurich, Institute for Strategy and Business Economics (ISU).
- Konrad, Kai A., 2007. "Strategy in contests: an introduction," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
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