Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215105 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8103
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We model the dynamic contest between two players as a game of tug-of-war with a Tullock contest success function (CSF). We show that (pure strategy) Markov perfect equilibrium of this game exists, and it is unique. In this equilibrium - in stark contrast to a model of tug-of-war with an all pay auction CSF - players exert positive efforts until the very last battle. Since the outcome of an individual battle is determined stochastically, even disadvantaged players who fell behind will occasionally win battles and hence the advantage likely change hands. We deliver a set of empirically appealing results on effort dynamics.
Subjects: 
contests
discouragement effect
perseverance
stochastic games
tug-of-war
Tullock contest success function
JEL: 
C72
D72
D74
Document Type: 
Working Paper
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