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Contests with rank-order spillovers

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  • Baye, Michael R.
  • Kovenock, Dan
  • Vries, Casper G. de

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. – Contests ; auctions ; spillovers -- Dieser Artikel entwickelt einen einheitlichen Rahmen zur Charakterisierung des symmetrischen Gleichgewichts eines Wettkampfes unter vollständiger Information, in dem zwei Spieler gleichzeitig ihren Einsatz wählen und die Strategie eines Spielers direkte oder indirekte Auswirkung auf den Gegenspieler hat. Diese Externalität hängt entscheidend von der Rangfolge der Entscheidungsvariablen ab. Solche Effekte finden sich in einer Vielzahl wichtiger ökonomischer Problemstellungen. Auch typische Wettkämpfe können in diesem Rahmen analysiert werden, wenn sie im Sinne jüngster experimenteller und verhaltensorientierter Modelle angepasst werden und angenommen wird, dass Individuen eine Abneigung gegen Ungleichheit haben oder Bedauern empfinden, falls sie einen unnötig hohen Einsatz gewählt haben. Wir geben das symmetrische Nash- Gleichgewicht für diese Klasse von Spielen an und zeigen, wie es direkt angewendet werden kann, um das gleichgewichtige Verhalten in Auktionen, Preissetzungsspielen, Wettkämpfen, Wettbewerb um Forschung und Entwicklung, Modellen für Rechtsstreitigkeiten und einer Reihe weiterer Wettkämpfe zu analysieren.

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Bibliographic Info

Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number SP II 2009-09.

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Date of creation: 2009
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Handle: RePEc:zbw:wzbmpg:spii200909

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Citations

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Cited by:
  1. Roman M. Sheremeta & Subhasish M. Chowdhury, 2014. "Strategically Equivalent Contests," Working Papers 14-06, Chapman University, Economic Science Institute.
  2. Michael R. Baye & Dan Kovenock & Casper G. de Vries, 2010. "The Herodotus Paradox," Tinbergen Institute Discussion Papers 10-090/2, Tinbergen Institute.
  3. Subhasish M. Chowdhury & Roman M. Sheremeta, 2010. "A generalized Tullock contest," Working Papers 10-08, Chapman University, Economic Science Institute.
  4. 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).
  5. Rabia Nessah, 2013. "Weakly Continuous Security in Discontinuous and Nonquasiconcave Games: Existence and Characterization," Working Papers 2013-ECO-20, IESEG School of Management.
  6. Jönsson, Stefan & Schmutzler, Armin, 2013. "All-Pay Auctions: Implementation and Optimality," CEPR Discussion Papers 9323, C.E.P.R. Discussion Papers.
  7. Segev, Ella & Sela, Aner, 2014. "Sequential all-pay auctions with noisy outputs," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 251-261.
  8. 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.
  9. 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..
  10. Sela, Aner, 2009. "Best-of-Three All-Pay Auctions," CEPR Discussion Papers 7224, C.E.P.R. Discussion Papers.
  11. Lu, Jingfeng, 2012. "Optimal auctions with asymmetric financial externalities," Games and Economic Behavior, Elsevier, vol. 74(2), pages 561-575.
  12. Gregor, Martin, 2012. "Contest for power in organizations," Economics Letters, Elsevier, vol. 114(3), pages 280-283.

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