Communication and commitment in contests

Qiang Fu, Oliver Gürtler and Johannes Münster

Journal of Economic Behavior & Organization, 2013, vol. 95, issue C, 1-19

Abstract: Players often engage in high-profile public communications to demonstrate their confidence in winning before they carry out actual competitive activities. We investigate players’ incentives to engage in such pre-contest communication. Our key assumption is that a player suffers a cost when he sends a “message of confidence” but later loses the contest. Sending a message thus increases one's incentive to win. For the favorite, this has the beneficial strategic effect of decreasing the underdog's equilibrium effort. In a standard Tullock contest model, however, with no costs of entry and complete information, this strategic advantage is not strong enough to outweigh the cost of sending the message. Therefore, communication can only be beneficial if it deters the rival's entry into the contest, and under asymmetric information.

Keywords: Competition; Signaling; Communication; Entry deterrence (search for similar items in EconPapers)
JEL-codes: C72 D61 D82 D83 O31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:95:y:2013:i:c:p:1-19

DOI: 10.1016/j.jebo.2013.08.011

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