Investment on human capital in a dynamic contest model

Author:

Keskin Kerim1,Sağlam Çağrı2

Affiliation:

1. Kadir Has University , 34083 İstanbul , Turkey

2. Bilkent University , 06800 Ankara , Turkey

Abstract

Abstract Although most contest games are modeled in such a way that the outcome depends only on the efforts exerted by the contestants, what is arguably more important is the contestants’ effective efforts which may be influenced also by their ability, human capital, strength, etc. In this paper, we investigate an extensive model including such an effectiveness parameter and analyze the optimal investment behavior in a dynamic conflict framework. At each period, two contestants compete for a common prize by choosing contest efforts and investment levels. Each contestant’s investment accumulates as his/her human capital which depreciates through time. Who wins the component contest at a particular period is determined by the contestants’ effective efforts, defined as increasing functions of their efforts and human capitals. Following the analysis of subgame perfect Nash equilibrium in a two-period model and of open-loop equilibrium in an infinite-horizon model, we provide intuitive comparative static results.

Publisher

Walter de Gruyter GmbH

Subject

Economics and Econometrics,Social Sciences (miscellaneous),Analysis,Economics and Econometrics,Social Sciences (miscellaneous),Analysis

Cited by 3 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. Fatigue accumulation in dynamic contests;Operations Research Letters;2022-05

2. A Dynamic Contest Model of Platform Competition in Two-Sided Markets;Journal of Theoretical and Applied Electronic Commerce Research;2021-08-18

3. Mathematical modeling and neural network prediction of the structure and dynamics of human capital of the Russian Federation;Vestnik Tomskogo gosudarstvennogo universiteta. Upravlenie, vychislitel'naya tekhnika i informatika;2020-12-01

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