Increasing dominance with no efficiency effect

I uncover a new force towards increasing dominance (the property whereby, in dynamic games, the leader tends to increase his or her lead in expected terms). The new effect results from the strategic choice of covariance in races. I assume that players must choose not the amount of resources to spend but how to allocate those resources. I show that. in equilibrium, the laggard chooses a less promising path, in effect trading off lower expected value for lower correlation with respect to the leader. This results in increasing dominance and holds true even if no joint-payoff (or efficiency) effect is present. (C) 2001 Elsevier Science.