Abstract
In this article, I analyze the effects of future liquidity constraints on the investment behavior of two contestants with asymmetric prize valuations in a dynamic contest model. Contestants compete in two consecutive Tullock contests in order to win a contest prize in each period. The loser of the first-period contest can be liquidity constraint in the second period. The model reveils the following four main results: Future liquidity constraints marginally affect today's intensity of competition but rather influence tomorrow's contest. A higher contest prize in both periods surprisingly decreases aggregate second-period investment in a symmetric contest. Counter intuitively, a higher asymmetry with respect to the contest prize valuations increases the first-period investment of both contestants. The effect of a higher asymmetry on second-period investment depends on which contestant won the first-period contest. Further results are derived with respect to the existence and uniqueness of the equilibrium, competitive balance and expected total profits.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
