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Contests with Rank-Order Spillovers

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  • Michael R. Baye

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Dan Kovenock

    (University of Iowa)

  • Casper G. de Vries

    (Tinbergen Institute and Erasmus University Rotterdam)

Abstract

This paper presents a unified framework for characterizing symmetric equilibrium in simultaneous move, two-player, rank-order contests with complete information, in which each player’s strategy generates direct or indirect affine “spillover” effects that depend on the rank-order of her decision variable. These effects arise in natural interpretations of a number of important economic environments, as well as in classic contests adapted to recent experimental and behavioral models where individuals exhibit inequality aversion or regret. We provide the closed-form solution for the symmetric Nash equilibria of this class of games, and show how it can be used to directly solve for equilibrium behavior in auctions, pricing games, tournaments, R&D races, models of litigation, and a host of other contests.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2008-20-baye-kovenock-devries.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2008-20.

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Date of creation: Nov 2008
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Handle: RePEc:iuk:wpaper:2008-20

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Citations

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Cited by:
  1. Segev, Ella & Sela, Aner, 2014. "Sequential all-pay auctions with noisy outputs," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 251-261.
  2. Aner Sela, 2012. "Sequential two-prize contests," Economic Theory, Springer, vol. 51(2), pages 383-395, October.
  3. Ella Segev & Aner Sela, 2011. "Sequential All-Pay Auctions with Head Starts and Noisy Outputs," Working Papers 1106, Ben-Gurion University of the Negev, Department of Economics.
  4. Michael R. Baye & Dan Kovenock J. & Casper De Vries, 2010. "The Herodotus Paradox," CESifo Working Paper Series 3135, CESifo Group Munich.
  5. Stefan Jönsson & Armin Schmutzler, 2013. "All-pay auctions: Implementation and optimality," ECON - Working Papers 108, Department of Economics - University of Zurich.
  6. Sela, Aner, 2009. "Best-of-Three All-Pay Auctions," CEPR Discussion Papers 7224, C.E.P.R. Discussion Papers.
  7. Subhasish Chowdhury & Roman Sheremeta, 2011. "A generalized Tullock contest," Public Choice, Springer, vol. 147(3), pages 413-420, June.
  8. Gregor, Martin, 2012. "Contest for power in organizations," Economics Letters, Elsevier, vol. 114(3), pages 280-283.
  9. Rabia Nessah, 2013. "Weakly Continuous Security in Discontinuous and Nonquasiconcave Games: Existence and Characterization," Working Papers 2013-ECO-20, IESEG School of Management.
  10. Lu, Jingfeng, 2012. "Optimal auctions with asymmetric financial externalities," Games and Economic Behavior, Elsevier, vol. 74(2), pages 561-575.
  11. Fehr, Dietmar & Schmid, Julia, 2010. "Exclusion in the all-pay auction: An experimental investigation," Discussion Papers, Research Unit: Market Behavior SP II 2010-04, Social Science Research Center Berlin (WZB).
  12. Chowdhury, Subhasish & Sheremeta, Roman, 2014. "Strategically Equivalent Contests," MPRA Paper 55450, University Library of Munich, Germany.
  13. Subhashish Modak Chowdhury & Roman M. Sheremeta, 2009. "A generalized Tullock contest and the existence of multiple equilibria," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 09-08, School of Economics, University of East Anglia, Norwich, UK..
  14. Todd Kaplan & Shmuel Zamir, 2012. "Asymmetric first-price auctions with uniform distributions: analytic solutions to the general case," Economic Theory, Springer, vol. 50(2), pages 269-302, June.

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