Abstract
Many grant applications have a preliminary stage where only a select group are invited to submit a full application. Similarly, procurement contracts by governments are often awarded through a two-stage procedure. We model and analyze such environments where the designer cares about the style of the application as well as its quality. The designer has the option of choosing an initial stage, where contestants can enter and learn about their desirability while the designer learns about their style. We determine closed form solutions for equilibrium outcomes and designer payoffs and use this to analyze whether or not a second stage is desirable, different rules for deciding who will advance, and whether or not to communicate the number of contestants that qualify for the second stage.
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We wish to thank participants from the Current Frontiers in the Theory of Contests workshop at the Max Planck Institute for Tax Law and Public Finance, Munich, 2016, as well as helpful comments by a co-editor and two referees. We would like to dedicate this paper to Dr.Michael Feige (Ben-Gurion University) and the other victims in the 2016 terror attack at the Sarona Market, Tel Aviv, as well as the workers in the cafes there. During that period and in that locale, we derived the bulk of our results.
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Kaplan, T.R., Wettstein, D. Two-stage contests with preferences over style. Econ Theory 74, 1141–1161 (2022). https://doi.org/10.1007/s00199-021-01388-z
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DOI: https://doi.org/10.1007/s00199-021-01388-z