Simultaneous Signaling In Elimination Contests

Jun Zhang (zhangjunqueens@gmail.com)

No 1184, Working Paper from Economics Department, Queen's University

Abstract: This paper analyzes the signaling effect of bidding in a two-roundelimination contest. Before the final round, bids in thepreliminary round are revealed and act as signals of thecontestants' private valuations. Depending on his valuation, acontestant may have an incentive to bluff or sandbag in thepreliminary round in order to gain an advantage in the finalround. I analyze this signaling effect and characterize theequilibrium in this game. Compared to the benchmark model, inwhich private valuations are revealed automatically before thefinal round and thus no signaling of bids takes place, I find thatstrong contestants bluff and weak contestants sandbag. In aseparating equilibrium, bids in the preliminary round fully revealthe contestants' private valuations. However, this signalingeffect makes the equilibrium bidding strategy in the preliminaryround steeper for high valuations and flatter for low valuationscompared to the benchmark model.

Keywords: all-pay auction; elimination contests; incomplete; lottery; signaling (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2008-05
New Economics Papers: this item is included in nep-cta and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1184

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