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Endogenous timing of contest with asymmetric information

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  • Qiang Fu

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Abstract

Simultaneous moves have been conventionally assumed in modeling rent-seeking competition. However, in reality many forms of contests involve contestants sequentially choosing their effort entries. This study allows agents to choose the timing of their moves before the contest takes place. In contrast to the previous literature, we introduce information asymmetries across agents. We find that in all sequential-move equilibria, the uninformed agent moves first. More generally we show that the order of agents’ moves in a sequential contest is a regularity stemming from information asymmetries. Furthermore, under plausible assumptions, sequential moves Pareto dominate simultaneous moves (from the view point of the players) and also result in lower rent-seeking expenditures. Our result explains the timing pattern in National Presidential Conventions observed from 1948 through 2004. Our result also applies to many other formal or informal institutions, which give rise to sequential contests. Copyright Springer Science + Business Media B.V. 2006

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File URL: http://hdl.handle.net/10.1007/s11127-006-8325-8
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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 129 (2006)
Issue (Month): 1 (October)
Pages: 1-23

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Handle: RePEc:kap:pubcho:v:129:y:2006:i:1:p:1-23

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Web page: http://www.springerlink.com/link.asp?id=100332

Related research

Keywords: Rent-Seeking; Contests; Timing; Information asymmetry;

References

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  1. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July.
  2. Hurley, Terrance M. & Shogren, Jason F., 1998. "Effort levels in a Cournot Nash contest with asymmetric information," Journal of Public Economics, Elsevier, vol. 69(2), pages 195-210, June.
  3. Warneryd, Karl, 2003. "Information in conflicts," Journal of Economic Theory, Elsevier, vol. 110(1), pages 121-136, May.
  4. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  5. Morgan, John, 2003. " Sequential Contests," Public Choice, Springer, vol. 116(1-2), pages 1-18, July.
  6. Bernardo, Antonio E & Talley, Eric & Welch, Ivo, 2000. "A Theory of Legal Presumptions," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 1-49, April.
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Cited by:
  1. Denter, Philipp & Morgan, John & Sisak, Dana, 2011. ""Where Ignorance is Bliss, 'tis Folly to be Wise": Transparency in Contests," Economics Working Paper Series 1128, University of St. Gallen, School of Economics and Political Science.
  2. Grégoire ROTA-GRAZIOSI & Magnus HOFFMANN, 2010. "Endogenous Timing in General Rent‐Seeking and Conflict Models," Working Papers 201024, CERDI.
  3. Baumann, Florian & Denter, Philipp & Friehe, Tim, 2013. "Hide or show? Endogenous observability of private precautions against crime when property value is private information," DICE Discussion Papers 115, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Karl Wärneryd, 2012. "Multi-player contests with asymmetric information," Economic Theory, Springer, vol. 51(2), pages 277-287, October.
  5. Fu, Qiang & Gürtler, Oliver & Münster, Johannes, 2013. "Communication and commitment in contests," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 1-19.
  6. Florian Baumann & Tim Friehe, 2013. "A note on the timing of investments in litigation contests," European Journal of Law and Economics, Springer, vol. 35(3), pages 313-326, June.

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