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Cover of: Investment Behaviour in a Two-Period Contest Model
Helmut Dietl, Martin Grossmann

Investment Behaviour in a Two-Period Contest Model

Section: Article
Volume 165 (2009) / Issue 3, pp. 401-417 (17)
Published 09.07.2018
DOI 10.1628/093245609789471998
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  • 10.1628/093245609789471998
Summary
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.