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Abstract

We study equilibrium in a multistage race in which players compete in a sequence of simultaneous move component contests. Players may win a prize for winning each component contest, as well as a prize for winning the overall race. Each component contest is an all-pay auction with complete information. We characterize the unique equilibrium analytically and demonstrate that it exhibits endogenous uncertainty. Even a large lead by one player does not fully discourage the other player, and each feasible state is reached with positive probability in equilibrium (pervasiveness). Total effort may exceed the value of the prize by a factor that is proportional to the maximum number of stages. Important applications are to war, sports, and R&D contests and the results have empirical counterparts there.

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Bibliographic Info

Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1187.

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Length: 33 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:pur:prukra:1187

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Web page: http://www.krannert.purdue.edu/programs/phd
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Related research

Keywords: all-pay auction ; contest ; race ; conflict ; multi-stage ; R&D ; endogenous uncertainty ; preemption ; discouragement;

Other versions of this item:

Find related papers by JEL classification:

• D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances

This paper has been announced in the following NEP Reports:

• NEP-ALL-2006-05-20 (All new papers)
• NEP-MIC-2006-05-20 (Microeconomics)

References

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