Contests with Rank-Order Spillovers

Michael R. Baye, Dan Kovenock () and Casper G. de Vries ()

No 2008-20, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

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.

New Economics Papers: this item is included in nep-gth
Date: 2008-11
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Related works:
Working Paper: Contests with Rank-Order Spillovers (2009)
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