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Perseverance and suspense in tug-of-war

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  • Karagözoğlu, Emin
  • Sağlam, Çağrı
  • Turan, Agah R.

Abstract

We study a tug-of-war game between two players using the lottery contest success function (CSF) and a quadratic cost (of effort) function. We construct a pure strategy symmetric Markov perfect equilibrium of this game, show that it is unique, and provide closed-form solutions for equilibrium strategies and values. 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 in this equilibrium. We deliver a set of empirically appealing results on effort dynamics.

Suggested Citation

  • Karagözoğlu, Emin & Sağlam, Çağrı & Turan, Agah R., 2021. "Perseverance and suspense in tug-of-war," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:mateco:v:95:y:2021:i:c:s0304406820301464
    DOI: 10.1016/j.jmateco.2020.102469
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    References listed on IDEAS

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    1. Konrad, Kai A. & Kovenock, Dan, 2009. "Multi-battle contests," Games and Economic Behavior, Elsevier, vol. 66(1), pages 256-274, May.
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    5. Kai A. Konrad, 2012. "Dynamic Contests and the Discouragement Effect," Revue d'économie politique, Dalloz, vol. 122(2), pages 233-256.
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    7. Konrad, Kai A. & Kovenock, Dan, 2005. "Equilibrium and Efficiency in the Tug-Of-War," Purdue University Economics Working Papers 1177, Purdue University, Department of Economics.
    8. Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 1-21.
    9. Christian Ewerhart & Julian Teichgräber, 2019. "Multi-battle contests, finite automata, and the tug-of-war," ECON - Working Papers 318, Department of Economics - University of Zurich.
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