Thursday 16 February 2017, 1.00PM to 2.00pm
Speaker(s): Jan Yngve Sand (University of Tromso)
Abstract: We look at motivation over time by setting up a dynamic contest model where winning the first contest yields an advantage in the second contest. The win advantage introduces an asymmetry into the competition that we find reduces the expected value to the contestants of being in the game, whilst it increases the efforts exerted. Hence, a win advantage is advantageous for an effort-maximizing contest designer, whereas in expectation it is not beneficial for the players. We also show that the principal should distribute all the prize mass to the second contest. Furthermore, we show that players' efforts increase over time provided that the second-contest prize is sufficiently high. Both these results hold for more than two players, albeit with a stricter condition for efforts to increase over time. With more than two players, we also find that introducing the win advantage is an effective mechanism for shifting effort to the early contest.
Location: Economics Staff Room A/EC202
Admission: Staff and PhD students