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Endogenous timing in general rent-seeking and conflict models

  • Hoffmann, Magnus
  • Rota-Graziosi, Grégoire

We examine simultaneous versus sequential choice of effort in a two-player contest. The timing of moves, determined in a preplay stage prior to the contest subgame, as well as the value of the prize is allowed to be endogenous. Contrary to endogenous timing models with an exogenously fixed prize the present paper finds the following: (1) Players may decide to choose their effort simultaneously in the subgame perfect equilibrium (SPE) of the extended game. (2) The SPE does not need to be unique, in particular, there is no unique SPE with sequential moves if the direct costs of effort are zero. (3) Symmetry among players does not rule out incentives for precommitment to effort locally away from the Cournot–Nash level. (4) Finally, there may be no correlation between win probability and strategic incentives in our framework; a finding most central in the analysis of fixed-prize contests.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 75 (2012)
Issue (Month): 1 ()
Pages: 168-184

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Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:168-184
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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