Perseverance and suspense in tug-of-war

Emin Karagözoğlu, Çağrı Sağlam and Agah R. Turan

Journal of Mathematical Economics, 2021, vol. 95, issue C

Abstract: We study a tug-of-war game between two players using the lottery contest success function (CSF) and a quadratic cost (of effort) function. We construct a pure strategy symmetric Markov perfect equilibrium of this game, show that it is unique, and provide closed-form solutions for equilibrium strategies and values. In stark contrast to a model of tug-of-war with an all-pay auction CSF, players exert positive efforts until the very last battle in this equilibrium. We deliver a set of empirically appealing results on effort dynamics.

Keywords: Contests; Discouragement effect; Lottery contest success function; Perseverance; Stochastic games; Tug-of-war (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:95:y:2021:i:c:s0304406820301464

DOI: 10.1016/j.jmateco.2020.102469

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