Contests with Rank-Order Spillovers
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.
|Keywords||auctions, contests, spillovers|
|JEL||C72, Noncooperative Games (jel), C73, Stochastic and Dynamic Games; Evolutionary Games (jel), D43, Oligopoly and Other Forms of Market Imperfection (jel), D44, Auctions (jel), D74, Conflict; Conflict Resolution; Alliances (jel)|
Baye, M.R, & de Vries, C.G. (2009). Contests with Rank-Order Spillovers (No. TI 2009-066/2). Discussion paper / Tinbergen Institute. Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/16514