Motivation in All‐Pay Contests

ABSTRACT This paper studies how agents with monetary and non‐monetary motivation interact strategically in competitions. Examining the question under an all‐pay contest framework, we show that there do not exist pure‐strategy equilibria when the competing agents share the same motivation. When agents with different motivation compete against each other, we determine the conditions for the existence of pure‐strategy equilibria and fully characterize the mixed‐strategy equilibria. The results help explain situations where prizes are ineffective in eliciting higher efforts in contests. They show that the discouragement effect is prevalent when competing agents harbor different motivation and illustrate how reputation and money can be complementary goods.