Information Transmission In Elimination Contests
I consider a two-stage elimination contest with uninformed and informed players. Informed players can signal their type to future uninformed opponents through their efforts in the first stage. Relative to the benchmark case of complete information, I find that an informed player exerts a higher effort in stage 1, if the uninformed future opponent is weaker than him. Conversely, he exerts a lower effort, if the uninformed opponent is stronger than him. This result is consistent with a conjecture in Rosen (AER, 1986). Intuitively, informed players may want to scare future uninformed opponents by exerting higher efforts in earlier rounds. However, trying to scare a stronger player may not be a sensible strategy because he might compete very fiercely. In equilibrium, informed players who are stronger than uninformed players separate from informed players who are weaker than uninformed players. This result differs from Horner and Sahuguet (2003) where stronger informed players pool with weaker informed players.
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