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Simultaneous Signaling In Elimination Contests

Author

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  • Jun Zhang

    (Queen's University)

Abstract

This paper analyzes the signaling effect of bidding in a two-roundelimination contest. Before the final round, bids in thepreliminary round are revealed and act as signals of thecontestants' private valuations. Depending on his valuation, acontestant may have an incentive to bluff or sandbag in thepreliminary round in order to gain an advantage in the finalround. I analyze this signaling effect and characterize theequilibrium in this game. Compared to the benchmark model, inwhich private valuations are revealed automatically before thefinal round and thus no signaling of bids takes place, I find thatstrong contestants bluff and weak contestants sandbag. In aseparating equilibrium, bids in the preliminary round fully revealthe contestants' private valuations. However, this signalingeffect makes the equilibrium bidding strategy in the preliminaryround steeper for high valuations and flatter for low valuationscompared to the benchmark model.

Suggested Citation

  • Jun Zhang, 2008. "Simultaneous Signaling In Elimination Contests," Working Paper 1184, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1184
    as

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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1184.pdf
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    References listed on IDEAS

    as
    1. Mailath, George J., 1988. "An abstract two-period game with simultaneous signaling--Existence of separating equilibria," Journal of Economic Theory, Elsevier, vol. 46(2), pages 373-394, December.
    2. Jun Zhang & Ruqu Wang, 2009. "The Role of Information Revelation in Elimination Contests," Economic Journal, Royal Economic Society, vol. 119(536), pages 613-641, March.
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    Cited by:

    1. Jun Zhang & Ruqu Wang, 2009. "The Role of Information Revelation in Elimination Contests," Economic Journal, Royal Economic Society, vol. 119(536), pages 613-641, March.
    2. Metzger, Lars P., 2015. "Alliance Formation in Contests with Incomplete Information," Ruhr Economic Papers 544, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Osório Costa, Antonio Miguel, 2010. "Signaling in Dynamic Contests: Some Impossibility Results," Working Papers 2072/151621, Universitat Rovira i Virgili, Department of Economics.
    4. repec:zbw:rwirep:0544 is not listed on IDEAS
    5. Chiappinelli, Olga, 2014. "An elimination contest with non-sunk bids," MPRA Paper 56140, University Library of Munich, Germany.
    6. Lars P. Metzger, 2015. "Alliance Formation in Contests with Incomplete Information," Ruhr Economic Papers 0544, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    7. Andrzej Kwiatkowski, 2010. "Non-cooperative incentives to share knowledge in competitive environments," Dundee Discussion Papers in Economics 243, Economic Studies, University of Dundee.

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    More about this item

    Keywords

    all-pay auction; elimination contests; incomplete; lottery; signaling;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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