Economic Theory

, Volume 51, Issue 2, pp 315–350 | Cite as

Contests with rank-order spillovers

  • Michael R. Baye
  • Dan Kovenock
  • Casper G. de Vries
Open Access
Symposium

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.

Keywords

Contests Auctions Spillovers 

JEL Classification

C72 C73 D43 D44 D74 

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Copyright information

© The Author(s) 2009

Authors and Affiliations

  • Michael R. Baye
    • 1
  • Dan Kovenock
    • 2
  • Casper G. de Vries
    • 3
  1. 1.Department of Business Economics and Public PolicyIndiana UniversityBloomingtonUSA
  2. 2.Department of EconomicsUniversity of IowaIowa CityUSA
  3. 3.Erasmus School of EconomicsErasmus University RotterdamRotterdamThe Netherlands

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