Investment Behaviour in a Two Period Contest Model

Martin Grossmann and Helmut Dietl

No 69, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)

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.

Keywords: contest; open-loop and closed-loop equilibrium; sports leagues (search for similar items in EconPapers)
JEL-codes: D92 L13 L83 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-09
New Economics Papers: this item is included in nep-mic and nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Investment Behaviour in a Two-Period Contest Model (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:iso:wpaper:0069

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