Working Paper: CEPR ID: DP8383
Authors: Reut Megidish; Aner Sela
Abstract: We study a sequential Tullock contest with two stages and two identical prizes. The players compete for one prize in each stage and each player may win either one or two prizes. The players have either decreasing or increasing marginal values for the prizes, which are commonly known, and there is a constraint on the total effort that each player can exert in both stages. We analyze the players' allocations of efforts along both stages when the budget constraints (effort constraints) are either restrictive, nonrestrictive or partially restrictive. We show that when the players are either symmetric or asymmetric and the budget constraints are restrictive, independent of the players' values for the prizes, each player allocates his effort equally along both stages of the contest.
Keywords: budget constraints; sequential contests; Tullock contests
JEL Codes: D44; O31; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| budget constraints are restrictive (H60) | each player allocates budget equally along both stages of the contest (C72) |
| budget constraints are non-restrictive and players have decreasing marginal values (D10) | total effort in the first stage is always lower than in the second stage (D29) |
| budget constraints are non-restrictive and players have increasing marginal values (D10) | total effort in the first stage is always higher than in the second stage (D29) |
| low budget constraints (H60) | players' values for the prizes do not affect their allocation of efforts (C72) |