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Motivating over Time: Dynamic Win Effects in Sequential Contests

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Author Info

  • Clark, Derek J.

    ()
    (Tromsø University Business School)

  • Nilssen, Tore

    ()
    (Dept. of Economics, University of Oslo)

  • Sand, Jan Yngve

    ()
    (Tromsø University Business School)

Abstract

In this paper we look at motivation over time by setting up a dynamic contest model where winning the fi…rst contest yields an advantage in the second contest. The win advantage introduces an asymmetry into the competition that we …find reduces the expected value to the contestants of being in the game, whilst it increases the efforts exerted. Hence it may seem that a win advantage is advantageous for an effort maximizing contest designer, whereas in expectation it will not be bene…cial for the players. We also show that the principal should distribute a majority of the total prize mass to the second contest. With ex ante asymmetry, the effect of the win advantage on the effort in the second contest depends on how disadvantaged the laggard is. A large disadvantage at the outset implies that as the win advantage increases, total effort for the disadvantaged …firm is reduced as the discouragement effect dominates the catching-up effect. If the inital disadvantage is not signi…ficant, then the catching-up effect dominates and the laggard increases its total effort.

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File URL: http://www.sv.uio.no/econ/english/research/memorandum/pdf-files/2012/memo-28-2012.pdf
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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 28/2012.

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Length: 21 pages
Date of creation: 12 Sep 2012
Date of revision:
Handle: RePEc:hhs:osloec:2012_028

Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Email:
Web page: http://www.oekonomi.uio.no/indexe.html
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Related research

Keywords: dynamic contest; win advantage; prize division;

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References

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  1. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  2. Martin Grossmann & Helmut M. Dietl, 2009. "Investment Behaviour in a Two-Period Contest Model," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(3), pages 401-417, September.
  3. Pablo Casas-Arce & F. Asís Martínez-Jerez, 2009. "Relative Performance Compensation, Contests, and Dynamic Incentives," Management Science, INFORMS, vol. 55(8), pages 1306-1320, August.
  4. Christian Terwiesch & Yi Xu, 2008. "Innovation Contests, Open Innovation, and Multiagent Problem Solving," Management Science, INFORMS, vol. 54(9), pages 1529-1543, September.
  5. J. Clark, Derek & Nilssen, Tore, 2010. "Learning by Doing in Contests," Memorandum 09/2010, Oslo University, Department of Economics.
  6. Mehlum, Halvor & Moene, Karl, 2008. "King of the Hill: Positional Dynamics in Contests," Memorandum 06/2008, Oslo University, Department of Economics.
  7. Konrad, Kai A. & Kovenock, Dan, 2006. "Multi-battle contests," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 122, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
  9. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
  10. Kevin J. Boudreau & Nicola Lacetera & Karim R. Lakhani, 2011. "Incentives and Problem Uncertainty in Innovation Contests: An Empirical Analysis," Management Science, INFORMS, vol. 57(5), pages 843-863, May.
  11. Ajay Kalra & Mengze Shi, 2001. "Designing Optimal Sales Contests: A Theoretical Perspective," Marketing Science, INFORMS, vol. 20(2), pages 170-193, December.
  12. Xiaotong Li, 2005. "Cheap Talk and Bogus Network Externalities in the Emerging Technology Market," Marketing Science, INFORMS, vol. 24(4), pages 531-543, October.
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