Dilemma of the Equality: an All-pay Contest with Individual Differences in Resource Holding Potential

Equilibrium and Efficiency in the Tug-of-War

“…We show that the contest effort that is dissipated in total and over all battle periods crucially depends on the starting point of the tug-of-war, and, for many starting points, is negligible, even if the asymmetry in the starting conditions is very limited. Hence, the multi-battle structure in a tug-of-war reduces the amount of resources that is dissipated in the contest, compared to a single all-pay auction, which has been studied by Hillman and Riley (1989) and deVries (1993, 1996) for the case of complete information and by Leininger (1995, 1996), Krishna and Morgan (1997), Kura (1999), Moldovanu and Sela (2001) and Gavious, Moldovanu and Sela (2002) in the context of incomplete information. 4 Our results may contribute to explaining why mechanisms such as hierarchies or other organizational structures have evolved by which the allocation of prizes is governed by a multi-stage conflict.…”