Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/90730 
Year of Publication: 
2012
Series/Report no.: 
Memorandum No. 28/2012
Publisher: 
University of Oslo, Department of Economics, Oslo
Abstract: 
In this paper 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 it may seem that a win advantage is advantageous for an effort maximizing contest designer, whereas in expectation it will not be beneficial for the players. We also show that the principal should distribute a majority of the total prize mass to the second contest. With ex ante asymmetry, the effect of the win advantage on the effort in the second contest depends on how disadvantaged the laggard is. A large disadvantage at the outset implies that as the win advantage increases, total effort for the disadvantaged firm is reduced as the discouragement effect dominates the catching-up effect. If the inital disadvantage is not significant, then the catching-up effect dominates and the laggard increases its total effort.
Subjects: 
dynamic contest
win advantage
prize division
JEL: 
D74
D72
Document Type: 
Working Paper

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