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Second, But Not Last: Competition with Positive Spillovers

Author

Listed:
  • Guerra Alice

    (Department of Economics, University of Bologna, Piazza Scaravilli 2, 40126 Bologna, Italy)

  • Parisi Francesco

    (School of Law, University of Minnesota, Minneapolis, USA)

Abstract

This paper extends the traditional rent-seeking model to consider contests in which the effects of the contestants’ efforts are externally unproductive (i.e., redistributive) but internally productive (i.e., with positive spillover effects on other contestants). Our results show that when players act sequentially, the presence of positive spillovers on other contestants may reduce, or even reverse, the first-mover’s advantage. A second-mover advantage is very likely to arise. Notably, in contests with multiple players, the second-mover advantage does not unravel into a last-mover advantage. Players want to be second, but not last. The comparative statics analysis shows how the strength of positive spillovers affects contestants’ equilibrium expenditures and payoffs, and aggregate rent dissipation.

Suggested Citation

  • Guerra Alice & Parisi Francesco, 2024. "Second, But Not Last: Competition with Positive Spillovers," Asian Journal of Law and Economics, De Gruyter, vol. 15(2), pages 231-242, May.
  • Handle: RePEc:bpj:ajlecn:v:15:y:2024:i:2:p:231-242:n:5
    DOI: 10.1515/ajle-2023-0178
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    References listed on IDEAS

    as
    1. Reinganum, Jennifer F., 1985. "A two-stage model of research and development with endogenous second-mover advantages," International Journal of Industrial Organization, Elsevier, vol. 3(3), pages 275-292, September.
    2. Lee, Sanghack & Hyeong Kang, J., 1998. "Collective contests with externalities," European Journal of Political Economy, Elsevier, vol. 14(4), pages 727-738, November.
    3. Zizzo, Daniel John, 2002. "Racing with uncertainty: a patent race experiment," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 877-902, June.
    4. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    competition; sequential rent seeking; spillover effects; second-mover advantage;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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