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Investment Behaviour in a Two-Period Contest Model

Martin Grossmann and Helmut Dietl

Journal of Institutional and Theoretical Economics (JITE), 2009, vol. 165, issue 3, 401-417

Abstract: This paper presents a two-period model of talent investments in which two clubs compete for a contest prize. We show that multiple 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 the 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.

JEL-codes: L83 D92 (search for similar items in EconPapers)
Date: 2009
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Working Paper: Investment Behaviour in a Two Period Contest Model (2007) Downloads
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