Repeated Contests with Toughness

39 Pages Posted: 5 Oct 2021 Last revised: 15 Dec 2021

See all articles by Marco Serena

Marco Serena

Max Planck Institute for Tax Law and Public Finance

Stefano Barbieri

Tulane University - Department of Economics

Date Written: October 4, 2021

Abstract

A set of players fights in a repeated standard all-pay auction for a fixed prize in each period. Each player is rational or tough; a tough player always exerts an exogenous, high "tough effort". We fully characterize the unique type-symmetric equilibrium. Rational players may exert tough efforts to appear tough. A rational player has strictly positive payoff only if she is monopolizing reputation for toughness. In a reputational oligopoly, a fierce war of attrition to become the monopolist may yield overdissipation. In a reputational monopoly instead, overdissipation never happens. Thus, reputational concerns may increase or decrease expected aggregate effort. The monopolist mixes between a non-tough effort to cash in on her reputation today and the tough effort to boost her reputation. While a monopoly may last arbitrarily long, an oligopoly has an endogenous maximum duration. Applications include turf wars, conflicts, and litigation.

JEL Classification: C72, D82, D83

Suggested Citation

Serena, Marco and Barbieri, Stefano, Repeated Contests with Toughness (October 4, 2021). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2021-16, Available at SSRN: https://ssrn.com/abstract=3935770 or http://dx.doi.org/10.2139/ssrn.3935770

Marco Serena (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

Stefano Barbieri

Tulane University - Department of Economics ( email )

New Orleans, LA 70118
United States

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