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Beating the Matthew Effect: Head Starts and Catching Up in a Dynamic All-Pay Auction*

Derek J. Clark () and Tore Nilssen ()
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Derek J. Clark: School of Business and Economics, University of Tromsø, Postal: UiT The Arctic University of Norway, School of Business and Economics, Postboks 6050 Langnes, 9037 Tromsø, Norway, https://en.uit.no/om/enhet/ansatte/person?p_document_id=41411&p_dimension_id=226746

No 2/2018, Memorandum from Oslo University, Department of Economics

Abstract: We consider an effort-maximizing principal distributing a prize fund over two consecutive all-pay auctions. The two contestants are doubly heterogeneous: one of them has a head start in the fi rst contest; and winning contest one gives an advantage in contest two that varies between players. We show that, with a large head start, the principal chooses a zero prize in contest two, i.e., runs a single contest. Otherwise, the laggard winning contest one may overturn the leaders head start, possibly inciting expected efforts equal to the prize value, avoiding the laggard giving up, and this way mitigating the Matthew effect.

Keywords: Contest; All-pay auction; Head start; Catching up; Mathhew effect (search for similar items in EconPapers)
JEL-codes: D72 D74 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des, nep-exp, nep-gth and nep-mic
Date: 2018-02-27
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