Group Contests with Private Information and the 'Weakest Link'

43 Pages Posted: 26 May 2018

See all articles by Stefano Barbieri

Stefano Barbieri

Tulane University - Department of Economics

Dan Kovenock

Chapman University - Economic Science Institute; CESifo (Center for Economic Studies and Ifo Institute)

David A. Malueg

University of California Riverside

Iryna Topolyan

University of Cincinnati - Department of Economics

Date Written: May 16, 2018

Abstract

We study group competition with a single public good prize, perfectly discriminating contest success function, and the weakest-link effort technology, in which the marginal cost of effort for each player is private information. We focus on pure strategy Bayes-Nash equilibria and show that teammates always employ symmetric strategies. Various degrees of coordination are possible, ranging from all cost types coordinating on a single effort level to every cost type choosing a distinct effort level. Such coordination may not enhance welfare. If groups are symmetric except for group size, players in the smaller group bid more aggressively than those in the larger group, but when the asymmetries are along multiple dimensions, no clear-cut conclusions can be made with respect to the effects of group sizes and valuations. As an additional avenue for cooperation, we investigate incentives to share private information via cheap talk among teammates, who then coordinate on the effort level most preferred by the player with the largest cost. A single group sharing information does better. But when players within-group cooperate in this fashion, all within-group gains are lost to increased competition between groups.

Keywords: All-Pay Auction, Groups, Bayes-Nash Equilibrium, Weakest Link, Incomplete Information, Coordination

JEL Classification: D61, D82, H41

Suggested Citation

Barbieri, Stefano and Kovenock, Daniel and Malueg, David A. and Topolyan, Iryna, Group Contests with Private Information and the 'Weakest Link' (May 16, 2018). Available at SSRN: https://ssrn.com/abstract=3179725 or http://dx.doi.org/10.2139/ssrn.3179725

Stefano Barbieri (Contact Author)

Tulane University - Department of Economics ( email )

New Orleans, LA 70118
United States

Daniel Kovenock

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

David A. Malueg

University of California Riverside ( email )

Economics Department
3136 Sproul Hall
Riverside, CA 92505
United States
951 827 1494 (Phone)

Iryna Topolyan

University of Cincinnati - Department of Economics ( email )

Carl H. Lindner Hall 2925 Campus Green Drive
PO Box 0371
Cincinnati, OH 45221-0211
United States

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