BEER Lab Meeting - Yuxi Chen

We investigate, both theoretically and experimentally, how ability heterogeneity influences effort provision in elimination contests. Our model features a two-stage Tullock elimination contest with four players, where players may differ in their abilities. A higher ability player has a greater chance of winning at each stage, given equal efforts, than a lower ability player. In the first stage (the semifinals), a high ability player competes against a low ability player. Theoretical predictions suggest that in the final, both players exert the same effort, regardless of the ability gap, and equilibrium efforts decline as the ability gap widens. In the semifinal, high ability players exert more effort than low ability players, with the effort ratio decreasing as the ability gap increases. We design an experiment to test these predictions.