Strategic Effort and Bandwagon Effects in Finite Multi-Stage Games with Non-Linear Externalities: Evidence from Triathlon

Abstract

This paper examines strategic effort and positioning choices resulting in bandwagon effects under externalities in finite multi-stage games using causal evidence from triathlon (Reichel, 2025). Focusing on open-water swim drafting where athletes reduce drag most effectively by swimming directly behind peerswe estimate its performance effects through a structural contest framework with endogenous, deterministic effort and drafting position. Leveraging exogenous variation from COVID-19 drafting bans in Austrian triathlons, we apply a panel leave-one-out (LOO/LOTO) peer ability instrumental variables (IV) strategy to isolate the causal non-linear effect of drafting. Results from restricted sample analysis and pooled estimated bandwagon IV effects show substantial and nonlinear gains: in small (group size below 10) drafting swim groups/clusters, each deeper position improves finishing rank on average by over 30%, with rapidly diminishing returns in larger groups. Leading however is consistently more costly than optimal positioning, aligning with theoretical predictions of energy expenditure (metabolic costs).