Sequential contests with first and secondary prizes

Asaf Iluz; Aner Sela

doi:10.1016/j.econlet.2018.06.029

Sequential contests with first and secondary prizes

Asaf Iluz, Aner Sela

Department of Economics

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

We study a sequential two-stage Tullock contest with two asymmetric players. The players compete for two prizes; the player with the highest effort in the first stage wins the secondary prize while the player with the highest total effort in both stages wins the first prize. Both players have the same cost functions where the marginal cost in the first stage is higher than in the second one. We analyze the subgame perfect equilibrium of this contest and reveal a paradoxical behavior such that the players’ utilities increase in their marginal effort cost.

Original language	English
Pages (from-to)	6-9
Number of pages	4
Journal	Economics Letters
Volume	171
DOIs	https://doi.org/10.1016/j.econlet.2018.06.029
State	Published - 1 Oct 2018

Keywords

Multi-prize contests
Multi-stage contests
Variable costs

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.econlet.2018.06.029

Cite this

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title = "Sequential contests with first and secondary prizes",

abstract = "We study a sequential two-stage Tullock contest with two asymmetric players. The players compete for two prizes; the player with the highest effort in the first stage wins the secondary prize while the player with the highest total effort in both stages wins the first prize. Both players have the same cost functions where the marginal cost in the first stage is higher than in the second one. We analyze the subgame perfect equilibrium of this contest and reveal a paradoxical behavior such that the players{\textquoteright} utilities increase in their marginal effort cost.",

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AB - We study a sequential two-stage Tullock contest with two asymmetric players. The players compete for two prizes; the player with the highest effort in the first stage wins the secondary prize while the player with the highest total effort in both stages wins the first prize. Both players have the same cost functions where the marginal cost in the first stage is higher than in the second one. We analyze the subgame perfect equilibrium of this contest and reveal a paradoxical behavior such that the players’ utilities increase in their marginal effort cost.

KW - Multi-prize contests

KW - Multi-stage contests

KW - Variable costs

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Sequential contests with first and secondary prizes

Abstract

Keywords

ASJC Scopus subject areas

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