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Asymmetric Contests with Conditional Investments

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  • Ron Siegel
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    Abstract

    This paper studies equilibrium behavior in a class of games that models asymmetric competitions with unconditional and conditional investments. Such competitions include lobbying settings, labor-market tournaments, and R& races, among others. I provide an algorithm that constructs the unique equilibrium in these games and apply it to study competitions in which a fraction of each competitor's investment is sunk and the rest is paid only by the winners. Complete-information all-pay auctions are a special case. (JEL D44, D72, D82)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.5.2230
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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 100 (2010)
    Issue (Month): 5 (December)
    Pages: 2230-60

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    Handle: RePEc:aea:aecrev:v:100:y:2010:i:5:p:2230-60

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    References

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    1. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, vol. 54(1), pages 63-82, January.
    2. Ellingsen, T., 1990. "Strategic Buyers and the Social Cost of Monopoly," Papers 05-90, Norwegian School of Economics and Business Administration-.
    3. Daniele Condorelli, 2009. "What money can't buy: allocations with priority lists, lotteries and queues," Discussion Papers 1482, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
    5. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
    6. Barut, Yasar & Kovenock, Dan, 1998. "The symmetric multiple prize all-pay auction with complete information," European Journal of Political Economy, Elsevier, vol. 14(4), pages 627-644, November.
    7. Parreiras, Sérgio O. & Rubinchik, Anna, 2010. "Contests with three or more heterogeneous agents," Games and Economic Behavior, Elsevier, vol. 68(2), pages 703-715, March.
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    Cited by:
    1. Matthias Kräkel & Frauke Lammers & Nora Szech, 2011. "Externalities in Recruiting," Bonn Econ Discussion Papers bgse02_2011, University of Bonn, Germany.
    2. Franke, Jörg & Kanzow, Christian & Leininger, Wolfgang & Schwartz, Alexandra, 2014. "Lottery versus all-pay auction contests: A revenue dominance theorem," Games and Economic Behavior, Elsevier, vol. 83(C), pages 116-126.
    3. David Pérez-Castrillo & David Wettstein, 2012. "Innovation Contests," Working Papers 654, Barcelona Graduate School of Economics.
    4. Theodore L. Turocy & Lucas Rentschler, 2014. "All-pay auctions with interdependent valuations: The highly competitive case," University of East Anglia Applied and Financial Economics Working Paper Series 063, School of Economics, University of East Anglia, Norwich, UK..
    5. Szech, Nora & Weinschenk, Philipp, 2013. "Rebates in a Bertrand game," Journal of Mathematical Economics, Elsevier, vol. 49(2), pages 124-133.
    6. Christian Ewerhart, 2014. "Elastic contests and the robustness of the all-pay auctions," ECON - Working Papers 155, Department of Economics - University of Zurich.
    7. Bettina Klose & Dan Kovenock J., 2012. "Extremism Drives Out Moderation," CESifo Working Paper Series 3804, CESifo Group Munich.
    8. Kaplan, Todd R & Zamir, Shmuel, 2014. "Advances in Auctions," MPRA Paper 54656, University Library of Munich, Germany.
    9. Bos, Olivier & Ranger, Martin, 2013. "All-Pay Auctions with Polynomial Rewards," MPRA Paper 47587, University Library of Munich, Germany.
    10. Zhiguo He & Gregor Matvos, 2012. "Debt and Creative Destruction: Why Could Subsidizing Corporate Debt be Optimal?," NBER Working Papers 17920, National Bureau of Economic Research, Inc.
    11. Stefan Jönsson & Armin Schmutzler, 2013. "All-pay auctions: Implementation and optimality," ECON - Working Papers 108, Department of Economics - University of Zurich.
    12. Julio González-Díaz & Ron Siegel, 2013. "Matching and price competition: beyond symmetric linear costs," International Journal of Game Theory, Springer, vol. 42(4), pages 835-844, November.
    13. Ron Siegel, 2014. "Contests with productive effort," International Journal of Game Theory, Springer, vol. 43(3), pages 515-523, August.
    14. Hirata, Daisuke, 2014. "A model of a two-stage all-pay auction," Mathematical Social Sciences, Elsevier, vol. 68(C), pages 5-13.

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