Simultaneous Signaling in Elimination Contests

Speaker：WANG Ruqu（Professor, School of Economics, Zhe Jiang Universiey）

Host：JIAO Qian, Associate Professor, Lingnan College

Time and Date：14:30-16:30, Nov. 5, 2021

Venue：WANG Daohan Conference Room 

Language: Chinese + English

Abstract：

In this paper, the signaling effect of bids (efforts) in a two-round elimination contest is analyzed. Bids in the first round are observed by all players and can signal players' private information which is useful in the second round bidding. When the second round contest sensitivity is higher than a cutoff, there exists no completely separating equilibrium; when it is lower than the cutoff, then under some regularity conditions, the equilibrium is completely separating. Comparing to the benchmark model where private information automatically becomes common knowledge right before the start of the second round, strong players would over-bid and weak players would under-bid; the presence of the signaling effect causes the first round bidding function steeper for high valuations and flatter for low valuations.