Multi-Battle Contests
35 Pages Posted: 19 Jul 2006
Date Written: April 2006
Abstract
We study equilibrium in a multistage race in which players compete in a sequence of simultaneous move component contests. Players may win a prize for winning each component contest, as well as a prize for winning the overall race. Each component contest is an all-pay auction with complete information. We characterize the unique equilibrium analytically and demonstrate that it exhibits endogenous uncertainty. Even a large lead by one player does not fully discourage the other player, and each feasible state is reached with positive probability in equilibrium (pervasiveness). Total effort may exceed the value of the prize by a factor that is proportional to the maximum number of stages. Important applications are to war, sports, and R&D contests and the results have empirical counterparts there.
Keywords: All-pay auction, contest, race, conflict, multi-stage, R&D, endogenous uncertainty, preemption, discouragement
Suggested Citation: Suggested Citation
Kai A. Konrad (Contact Author)
Max Planck Institute for Tax Law and Public Finance ( email )
Marstallplatz 1
Munich, 80539
Germany
HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, 81679
Germany
IZA Institute of Labor Economics
P.O. Box 7240
Bonn, 53072
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
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