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The Role of Budget Constraints in Sequential Elimination Tournaments

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  • Malin Arve
  • Olga Chiappinelli

Abstract

We study how budget constraints affect effort provision in sequential elimination tournaments. Our main result is that the introduction of budget constraints has two opposing effects on the initial effort of the unconstrained contestants, and leads to a non‐monotonicity of this effort. This implies that if the budget asymmetry is not too large, total first‐stage effort from unconstrained contestants is larger than in the case with unconstrained contestants only. We also provide evidence that total first‐stage effort and total effort from unconstrained contestants might be larger in an asymmetric contest.

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  • Malin Arve & Olga Chiappinelli, 2021. "The Role of Budget Constraints in Sequential Elimination Tournaments," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(4), pages 1059-1087, October.
    • Handle: RePEc:bla:scandj:v:123:y:2021:i:4:p:1059-1087
    DOI: 10.1111/sjoe.12440
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    Cited by:

    1. Mendel, Moritz & Pieroth, Ferdinand & Seel, Christian, 2021. "Your failure is my opportunity—Effects of elimination in contests," Journal of Mathematical Economics, Elsevier, vol. 95(C).

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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