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Investment Behaviour in a Two Period Contest Model

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Author Info
Martin Grossmann () (Institute for Strategy and Business Economics, University of Zurich)
Helmut Dietl () (Institute for Strategy and Business Economics, University of Zurich)

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Abstract

This paper presents a two-period model of talent investments where two clubs compete with respect to a contest prize. We show that two qualitatively different types of 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 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
Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0069.

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Length: 25 pages
Date of creation: Sep 2007
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Handle: RePEc:iso:wpaper:0069

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Related research
Keywords: contest; open-loop and closed-loop equilibrium; sports leagues;

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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
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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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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