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Entry in group contests

Luke Boosey (), Philip Brookins () and Dmitry Ryvkin ()
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Luke Boosey: Department of Economics, Florida State University
Philip Brookins: Department of Economics, University of South Carolina

Working Papers from Department of Economics, Florida State University

Abstract: We study contests among groups of individuals where each player endogenously decides whether or not to participate in competition as a member of their group. Within-group aggregation of effort is best-shot, i.e., each group's performance is determined by the highest investment among its members. We consider a generalized all-pay auction setting, in which the group with the highest performance wins the contest with certainty. Players' values for winning are private information at the entry stage, but may be disclosed at the competition stage. We compare three disclosure policies: (i) no disclosure, when the number of entrants remains unknown and their values private; (ii) within-group disclosure, when this information is disclosed within each group but not across groups; and (iii) full disclosure, when the information about entrants is disclosed across groups. For the benchmark case of contests between individuals, we show that information disclosure always leads to a reduction in aggregate investment. However, this is no longer true in group contests: Within-group disclosure unambiguously raises aggregate investment, while the effect of full disclosure is ambiguous.

Keywords: group contest; best shot; endogenous entry; information disclosure (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Pages: 31
Date: 2020-02
New Economics Papers: this item is included in nep-cdm, nep-des, nep-mic and nep-reg
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