 Competitive Burnout: Theory and Experimental EvidenceJ. Atsu Amegashie, Charles Cadsby and Yang Song () No 507, Working Papers from University of Guelph, Department of Economics and Finance Abstract: We examine equilibrium selection in a two-stage sequential elimination contest in which contestants compete for a single prize. This game has a continuum of equilibria, only one of which satisfies the Coalition-Proof Nash Equilibrium (CPNE) refinement. That equilibrium involves “burning out” by using all of one’s resources in the first stage. It is Pareto-dominated by many other equilibria. We find that CPNE predicts well when four people compete, but not when eight people compete for two second-stage spots. Using a cognitive hierarchy (CH) framework, we show that when the number of players and the mean number of thinking steps are large, the CH prediction involves burning out. This provides a partial explanation of our results. We also develop a formal argument as to why CPNE logic is more compelling with more players. We conclude that more competition leads to higher bids, and that burning out is indeed a competitive phenonemon. Keywords: all-pay auction; burning out; cognitive hierarchy; coalition-proof Nash equilibrium; contests; experiment; step thinking. (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:gue:guelph:2005-7 Access Statistics for this paper More papers in Working Papers from University of Guelph, Department of Economics and Finance Contact information at EDIRC. |
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