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Signaling In A Dynamic Contest With Boundedly Rational Players

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  • J. Atsu Amegashie

    (Department of Economics, University of Guelph)

Abstract

I consider a two-stage (dynamic) elimination contest with uninformed and informed players. Informed players can signal their type to future uninformed opponents through their efforts in the first stage. Uninformed players might make wrong inferences. It is in this sense that they are boundedly rational. Relative to the benchmark case of complete information, I find that there exists an equilibrium in which an informed player exerts a higher effort in the semi-final in the incomplete-information version of the game, if the uninformed player is sufficiently weak. The informed player exerts a smaller effort, if the uninformed player is sufficiently strong. Intuitively, informed players may want to scare future uninformed opponents by exerting higher efforts in earlier rounds. However, trying to scare a very strong player may not be a sensible strategy because he might compete very fiercely. Surprisingly, I find that a higher semi-final effort by the informed player is not necessarily interpreted by the uninformed player as a signal of higher ability.

Suggested Citation

  • J. Atsu Amegashie, 2005. "Signaling In A Dynamic Contest With Boundedly Rational Players," Working Papers 0510, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2005-10
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    References listed on IDEAS

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    More about this item

    Keywords

    bounded rationality; dynamic contests; signaling; subjective beliefs.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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