Two-stage contests with effort-dependent rewards

Aner Sela

No 11113, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study two-stage all-pay contests where there is synergy between the stages. The reward for each contestant is fixed in the first stage while it is effort-dependent in the second one. We assume that a player's effort in the first stage either increases (positive synergy) or decreases (negative synergy) his reward in the second stage. The subgame perfect equilibrium of this contest is analyzed with either positive or negative synergy. We show, in particular, that whether the contestants are symmetric or asymmetric their expected payoffs may be higher under negative synergy than under positive synergy. Consequently, they prefer smaller rewards (negative synergy) over higher ones (positive synergy).

Keywords: Effort-dependent rewards; Two-stage all-pay contests (search for similar items in EconPapers)
JEL-codes: C70 D44 L12 O32 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
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Working Paper: TWO STAGE CONTESTS WITH EFFORT-DEPENDENT REWARDS (2016)
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