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Two-stage contests with effort-dependent values of winning

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  • Aner Sela

    () (Ben-Gurion University of the Negev)

Abstract

Abstract We study two-stage all-pay contests in which synergy exists between the stages. The value of winning for each contestant is fixed in the first stage while it is effort-dependent in the second one. We assume that a player’s effort in the first stage either increases (positive synergy) or decreases (negative synergy) his value of winning in the second stage. The subgame perfect equilibrium of this contest is analyzed with either positive or negative synergy. We show, in particular, that whether the contestants are symmetric or asymmetric their expected payoffs may be higher under negative synergy than under positive synergy. Consequently, they prefer smaller values of winning (negative synergy) over higher ones (positive synergy).

Suggested Citation

  • Aner Sela, 2017. "Two-stage contests with effort-dependent values of winning," Review of Economic Design, Springer;Society for Economic Design, vol. 21(4), pages 253-272, December.
  • Handle: RePEc:spr:reecde:v:21:y:2017:i:4:d:10.1007_s10058-017-0205-9
    DOI: 10.1007/s10058-017-0205-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Two-stage contests; All-pay auctions; Effort-dependent rewards;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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