Multi-battle contests

Konrad, Kai A. and Kovenock, Dan (March 2006): Multi-battle contests. SFB/TR 15 Discussion Paper No. 122

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.

• Item Type: Paper
• Keywords: all-pay auction, contest, race, conflict, multi-stage, R&D, endogenous uncertainty, preemption, discouragement
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A2 - Konflikte in Organisations- und Steuerungsproblemen; Economics; Economics > Chairs > MPI for Tax Law and Public Finance
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: D72, D74
• Language: English