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Economic Theory

, Volume 51, Issue 2, pp 315–350

First Online: 28 August 2009Received: 09 September 2008Accepted: 29 June 2009


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, RandD races, models of litigation, and a host of other contests.

KeywordsContests Auctions Spillovers We are grateful to two referees for exceptionally lucid and helpful reports. We have also benefited from conversations with Murali Agastya, Chaim Fershtman, Srihari Govindan, Rick Harbaugh, Wolfgang Leininger, Benny Moldovanu, and Michael Rauh. Finally, we thank Nels Leader, participants in the conference on -Contests: Theory and Applications- at the Stockholm School of Economics, and participants at the 2008 CESifo Workshop on -Advances in the Theory of Contests and its Applications- in Venice. Kovenock has benefited from the financial support of the Wissenschaftszentrum Berlin für Sozialforschung.

JEL ClassificationC72 C73 D43 D44 D74  Download to read the full article text

Author: Michael R. Baye - Dan Kovenock - Casper G. de Vries


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