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Contests with rank-order spillovers

  • Michael Baye

    ()

  • Dan Kovenock

    ()

  • Casper Vries

    ()

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. Copyright The Author(s) 2012

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File URL: http://hdl.handle.net/10.1007/s00199-009-0489-2
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 51 (2012)
Issue (Month): 2 (October)
Pages: 315-350

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Handle: RePEc:spr:joecth:v:51:y:2012:i:2:p:315-350
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