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Multi-Stage Contests with Stochastic Ability

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  • Konrad, Kia A.
  • Kovenock, Dan

Abstract

We consider the properties of perfectly discriminating contests in which players’ abilities are stochastic, but become common knowledge before efforts are expended. Players whose expected ability is lower than that of their rivals may still earn a positive expected payoff from participating in the contest, which may explain why they participate. We also show that an increase in the dispersion of a player’s own ability generally benefits this player. It may benefit or harm his rival, but cannot benefit the rival more than it benefits himself. We also explore the role of stochastic ability for sequential contests with the same opponent (multi-battle contests) and with varying opponents (elimination tournaments) and show that it reduces the strong discouragement effects and hold-up problems that may otherwise emerge in such games. High own ability dispersion selects such players into the contest and favors them in elimination contests.

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Bibliographic Info

Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1192.

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Length: 27 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:pur:prukra:1192

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Keywords: All-Pay Auctions ; Elimination Tournament ; Contest ; Race ; Conflict ; Multi-Stage ; Random Ability ; Discouragement;

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References

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Cited by:
  1. Theofanis Tsoulouhas & Kosmas Marinakis, 2007. "Tournaments with Ex Post Heterogeneous Agents," Economics Bulletin, AccessEcon, vol. 4(41), pages 1-9.

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