Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 23/2014: Keep on Fighting: Dynamic Win Effects in an All-Pay Auction

Derek J. Clark (), Tore Nilssen () and Jan Yngve Sand ()
Additional contact information
Derek J. Clark: School of Business and Economics, Postal: University of Tromsø , NO-9037 Tromsø, Norway
Tore Nilssen: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Jan Yngve Sand: School of Business and Economics, Postal: University of Tromsø , NO-9037 Tromsø , Norway

Abstract: We investigate a multi-period contest model in which a contestant.s present success gives an advantage over a rival in the future. How this win advantage affects contestants.efforts, and whether the laggard gives up or keep on fighting are key issues. We find that the expected effort of the laggard will always be higher than the rival at some stage in the series of contests, and this is most likely to happen when at a large disadvantage or at a late stage in the series.

Keywords: win advantage; motivation; contest; discouragement

JEL-codes: D72; D74

25 pages, October 16, 2014

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