The value of commitment in contests and tournaments when observation is costly |
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| Authors: | John Morgan,Felix V rdy |
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| Affiliation: | aHaas School of Business, University of California, Berkeley, USA;bInternational Monetary Fund, Washington, DC, USA |
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| Abstract: | We study the value of commitment in sequential contests when the follower faces small costs to observe the leader's effort. We show that the value of commitment vanishes entirely in this class of games. By contrast, in sequential tournaments—games where, at a cost, the follower can observe the effectiveness of the leader's effort—the value of commitment is preserved completely provided that the observation costs are sufficiently small. |
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| Keywords: | Contests Tournaments Rent-seeking Commitment Costly leader games Noisy leader games |
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