Spatial contests

Competition in some markets is a contest. Sellers compete for contracts by making promotional efforts. As in an all-pay auction, effort cannot be reco vered even if the seller is not awarded the contract. The equilibrium locat ion choices of sellers in a spatial model if firms compete for customers in an all-pay auction are the same as in the standard spatial price discrimin ation model. However, in contrast to spatial price discrimination, these lo cation choices are inefficient if sellers' competition for customers is a c ontest. (C) 2000 Elsevier Science B.V. All rights reserved.