Two-Stage Contests with Private Information
- American Economic Journal: Microeconomics (Forthcoming)
In perfectly discriminating contests with private information, low
ability contestants prefer to appear strong while high ability contestants prefer to appear weak. In a two-stage contest, this leads
to a unique symmetric equilibrium with partial pooling in the first
stage. A higher output in the first contest leads to a weakly higher
belief about the contestant's ability entering the second contest.
We characterize this unique equilibrium when cost of effort is linear and show how the prize allocation and type distribution impact
contestants' expected output, payoffs, and the probability of surprise victories.
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