Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2009-07-28 Number: 09-066/2 Author-Name: Michael R. Baye Author-Workplace-Name: Indiana University Author-Name: Dan Kovenock Author-Workplace-Name: University of Iowa Author-Name: Casper G. de Vries Author-Workplace-Name: Erasmus University Title: Contests with Rank-Order Spillovers 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 ligitation, and a host of other contests.
This paper has been accepted by 'Economic Theory'. Classification-JEL: C72, C73, D43, D44, D74 Keywords: Contests, Auctions, Spillovers File-Url: http://papers.tinbergen.nl/09066.pdf File-Format: application/pdf File-Size: 298395 bytes Handle: RePEc:tin:wpaper:20090066