Second, but not Last: Competition with Positive Spillovers

Asian Journal of Law & Economics (Forthcoming)

Minnesota Legal Studies Research Paper No. 24-02

11 Pages Posted: 13 Jan 2024

See all articles by Alice Guerra

Alice Guerra

University of Bologna - Department of Economics

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Date Written: December 21, 2023

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.

Keywords: competition, sequential rent seeking, spillover effects, second-mover advantage

JEL Classification: C72, D72

Suggested Citation

Guerra, Alice and Parisi, Francesco, Second, but not Last: Competition with Positive Spillovers (December 21, 2023). Asian Journal of Law & Economics (Forthcoming), Minnesota Legal Studies Research Paper No. 24-02, Available at SSRN: https://ssrn.com/abstract=4674211 or http://dx.doi.org/10.2139/ssrn.4674211

Alice Guerra (Contact Author)

University of Bologna - Department of Economics ( email )

Bologna
Italy

Francesco Parisi

University of Minnesota - Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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