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Contests with Rank-Order Spillovers

  • 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)

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://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2008-20-baye-kovenock-devries.pdf
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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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  5. Michael R. Baye & Dan Kovenock & Casper G. de Vries, 2004. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," Working Papers 2004-24, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  6. Ettinger, David, 2003. "Efficiency in auctions with crossholdings," Economics Letters, Elsevier, vol. 80(1), pages 1-7, July.
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  20. Basu, Kaushik, 1994. "The Traveler's Dilemma: Paradoxes of Rationality in Game Theory," American Economic Review, American Economic Association, vol. 84(2), pages 391-95, May.
  21. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
  22. Lizzeri, Alessandro & Persico, Nicola, 2000. "Uniqueness and Existence of Equilibrium in Auctions with a Reserve Price," Games and Economic Behavior, Elsevier, vol. 30(1), pages 83-114, January.
  23. Burkhard Hehenkamp & Wolfgang Leininger & Alex Possajennikov, 2003. "Evolutionary Equilibrium in Tullock Contests: Spite and Overdissipation," Discussion Papers in Economics 03_01, University of Dortmund, Department of Economics.
  24. Helsley, Robert W. & Strange, William C., 2008. "A game-theoretic analysis of skyscrapers," Journal of Urban Economics, Elsevier, vol. 64(1), pages 49-64, July.
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  27. Richard Engelbrecht-Wiggans & Elena Katok, 2007. "Regret in auctions: theory and evidence," Economic Theory, Springer, vol. 33(1), pages 81-101, October.
  28. Kittsteiner, Thomas, 2003. "Partnerships and double auctions with interdependent valuations," Games and Economic Behavior, Elsevier, vol. 44(1), pages 54-76, July.
  29. Qiang Fu, 2006. "A Theory of Affirmative Action in College Admissions," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 420-428, July.
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  35. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June.
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