Contests & Conflict | 20.10.2021 | 17:00
Contests with Network Externalities: Theory & Evidence

Referent: Luke Boosey

Date & Time: Cincinnati (11 am), Los Angeles (8 am), Bath (4 pm), Munich (5 pm), Singapore (11 pm), Beijing (11 pm), Sydney (October 21, 2 am)

Luke Boosey will present his paper titled "Contests with Network Externalities: Theory & Evidence" (joint work with Christopher Brown).

Abstract of the paper:
This paper considers the impact of identity-dependent externalities on competitive behavior in all-pay contests. We introduce a model of network contest games, in which the prize generates externalities for players directly linked to the winner, and establish existence and sufficient conditions for uniqueness of Nash equilibria. Both the structure of the network and nature of the externalities have intuitive consequences for equilibrium investment. In general, positive externalities introduce free-riding incentives, whereas negative externalities intensify competition, especially among highly connected agents. Results from a laboratory experiment provide robust empirical support for the comparative static predictions of the model. Our experimental findings also suggest that observed patterns of mean over-investment relative to point predictions may be driven by both heterogeneous joy of winning and social efficiency concerns that emerge in the presence of IDEs. Altogether, our study provides a novel application for the theory of network games, and new insights regarding behavior in all-pay contests.

Chair: Dan Kovenock, Co-Chair: Iryna Topolyan

Ansprechpartner

Event Team

Max-Planck-Institut für Steuerrecht und Öffentliche Finanzen

Marstallplatz 1
80539 München

Telefon: +49-89-24246-5255
Fax: +49-89-24246-5299

E-Mail: contests@tax.mpg.de