Contests with endogenous claims: Conflict dissipation

We examine a one-dimensional policy contest between two agents that takes place in two steps: first, agents choose policy proposals; then, they engage in a Tullock contest in which one of the proposals prevails. We show that there is a unique subgame perfect equilibrium (in undominated strategies), in which both contestants moderate their claims equally. When the contest is sufficiently competitive, proposals converge to the center, and conflict dissipates. Expected payoffs increase with the degree of competitiveness (up to an upper bound), while aggregate effort increases to a maximum and then decreases. • Contest competitiveness raises effort when prizes and costs are symmetric. • With endogenous prizes, competitiveness leads to more moderate claims. • Greater competitiveness can result in lower total effort. • Endogenous prizes rule out contest equilibria in semi-mixed strategies.