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Investment Behaviour in a Two-Period Contest Model

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Author Info
Martin Grossmann
Helmut M. Dietl

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Abstract

This paper presents a two-period model of talent investments in which two clubs compete for a contest prize. We show that multiple equilibria are possible, using a closed-loop approach with strictly convex costs: The large-market club invests in both periods more than the small-market club or the small-market club invests in both periods more than the large-market club. In the case of an open-loop approach with strictly convex costs, however, the large-market club always invests more. The open-loop and closed-loop equilibria coincide if costs are linear.

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 165 (2009)
Issue (Month): 3 (September)
Pages: 401-417
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200909)165:3_401:ibiatc_2.0.tx_2-c

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Find related papers by JEL classification:
L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August. [Downloadable!] (restricted)
    Other versions:
  2. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December. [Downloadable!] (restricted)
  3. Stefan Szymanski & Stefan KÈsenne, 2004. "Competitive balance and gate revenue sharing in team sports," Journal of Industrial Economics, Blackwell Publishing, vol. 52(1), pages 165-177, 03. [Downloadable!] (restricted)
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  4. Reinganum, Jennifer F., . "A Class of Differential Games Where the Closed-Loop and Open-Loop Nash Equilibria Coincide," Working Papers 333, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  5. El-Hodiri, Mohamed & Quirk, James, 1971. "An Economic Model of a Professional Sports League," Journal of Political Economy, University of Chicago Press, vol. 79(6), pages 1302-19, Nov.-Dec.. [Downloadable!] (restricted)
  6. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring. [Downloadable!] (restricted)
  7. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 114-123, 04. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Helmut Dietl & Tobias Duschl & Egon Franck & Markus Lang, 2009. "A Contest Model of a Professional Sports League with Two-Sided Markets," Working Papers 0912, International Association of Sports Economists. [Downloadable!]
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  2. Helmut Dietl & Egon Franck & Martin Grossmann & Markus Lang, 2009. "Contest Theory and its Applications in Sports," Working Papers 0913, International Association of Sports Economists. [Downloadable!]
    Other versions:
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