Voluntary Disclosure in Asymmetric Contests

University of Zurich, Department of Economics, Working Paper No. 279, Revised version

93 Pages Posted: 23 Feb 2018 Last revised: 16 Jan 2021

See all articles by Christian Ewerhart

Christian Ewerhart

University of Zurich, Department of Economics

Julia Lareida

University of Zurich - Department of Economics

Date Written: January 10, 2021

Abstract

This paper studies the incentives for interim voluntary disclosure of verifiable information in probabilistic all-pay contests. Provided that the contest is uniformly asymmetric, full revelation is the unique perfect Bayesian equilibrium outcome. This is so because the weakest type of the underdog will try to moderate the favorite, while the strongest type of the favorite will try to discourage the underdog─so that the contest unravels. Self-disclosure is optimal even though a weak favorite or strong underdog may be induced to raise their efforts, i.e., show "dominant" or "defiant" reactions. To avert Pareto inferior unraveling, the favorite may prefer to shut down communication, but this is never the case for the underdog. We also consider partial information release, cheap talk, Bayesian persuasion, information design, correlation, and continuous types. Applications are discussed. The proofs employ novel arguments in monotone comparative statics and an improved version of Jensen's inequality.

Keywords: Asymmetric contests, incomplete information, disclosure, strategic complements and substitutes, dominance and defiance, Bayesian persuasion, Jensen's inequality

JEL Classification: C72, D74, D82, J71

Suggested Citation

Ewerhart, Christian and Lareida, Julia, Voluntary Disclosure in Asymmetric Contests (January 10, 2021). University of Zurich, Department of Economics, Working Paper No. 279, Revised version, Available at SSRN: https://ssrn.com/abstract=3123831 or http://dx.doi.org/10.2139/ssrn.3123831

Christian Ewerhart (Contact Author)

University of Zurich, Department of Economics ( email )

Schoenberggasse 1
Zurich, CH-8001
Switzerland

Julia Lareida

University of Zurich - Department of Economics ( email )

Zürich
Switzerland

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