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Perseverance and suspense in tug-of-war

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  • Karagözoğlu, Emin
  • Sağlam, Çağrı
  • Turan, Agah R.

Abstract

We study a tug-of-war game between two players using the lottery contest success function (CSF) and a quadratic cost (of effort) function. We construct a pure strategy symmetric Markov perfect equilibrium of this game, show that it is unique, and provide closed-form solutions for equilibrium strategies and values. In stark contrast to a model of tug-of-war with an all-pay auction CSF, players exert positive efforts until the very last battle in this equilibrium. We deliver a set of empirically appealing results on effort dynamics.

Suggested Citation

  • Karagözoğlu, Emin & Sağlam, Çağrı & Turan, Agah R., 2021. "Perseverance and suspense in tug-of-war," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:mateco:v:95:y:2021:i:c:s0304406820301464
    DOI: 10.1016/j.jmateco.2020.102469
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    References listed on IDEAS

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    1. Lones Smith & Giuseppe Moscarini, 2007. "Optimal Dynamic Contests," 2007 Meeting Papers 249, Society for Economic Dynamics.
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    3. Konrad, Kai Andreas & Kovenock, Daniel J., 2005. "Equilibrium and efficiency in the tug-of-war [Gleichgewicht und Effizienz im "Tug of War"]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2005-14, WZB Berlin Social Science Center.
    4. Konrad, Kai A. & Kovenock, Dan, 2009. "Multi-battle contests," Games and Economic Behavior, Elsevier, vol. 66(1), pages 256-274, May.
    5. Deck, Cary & Sheremeta, Roman M., 2019. "The tug-of-war in the laboratory," European Journal of Political Economy, Elsevier, vol. 60(C).
    6. Kai A. Konrad, 2012. "Dynamic Contests and the Discouragement Effect," Revue d'économie politique, Dalloz, vol. 122(2), pages 233-256.
    7. Christian Ewerhart & Julian Teichgräber, 2019. "Multi-battle contests, finite automata, and the tug-of-war," ECON - Working Papers 318, Department of Economics - University of Zurich.
    8. Emin Karagözoglu & Cagri Saglam & Agah R. Turan, 2020. "Tullock Brings Perseverance and Suspense to Tug-of-War," CESifo Working Paper Series 8103, CESifo.
    9. Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 1-21.
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