DP13647 Networks in Conflict: A Variational Inequality Approach

Author(s): Jin Xu, Yves Zenou, Junjie Zhou
Publication Date: April 2019
Date Revised: April 2019
Keyword(s): Contests, network games, variational inequality
JEL(s): C72, D74, D85
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13647

We study a very general contest game in which players exert efforts in multiple battles. The conflict structure, which represents who participates in which battlefield, is arbitrary and can be represented by a hypergraph. We show, under mild conditions on the cost function and contest technology, that the set of pure strategy Nash equilibria is nonempty and convex, and provide equivalent characterizations using techniques from Variational Inequality (VI). We demonstrate that the strong monotonicity of the cost function always implies the uniqueness of Nash equilibrium regardless of the conflict structure. We also perform an extensive comparative statics analysis with respect to the parameters of the model and discuss several applications of our model. Our general model incorporates many existing models of single or multi-battle contests as special cases when the conflict network and/or the cost function take particular forms.