Dan Kovenock - Academia.edu (original) (raw)
Papers by Dan Kovenock
Economic Theory, Jun 20, 2020
Social Science Research Network, 2010
Countries compete for new FDI investment, whereas stocks of FDI generate agglomeration benefits a... more Countries compete for new FDI investment, whereas stocks of FDI generate agglomeration benefits and are potentially subject to extortionary taxation. We study the interaction between these aspects in a simple vintage capital framework with discrete time and an infinite horizon, focussing on Markov perfect equilibrium. We show that the equilibrium taxation destabilizes agglomeration advantages. The agglomeration advantage is valuable, but is exploited in the short run. The tax revenue in the equilibrium is substantial, and higher on "old" FDI than on "new" FDI, even though countries are not allowed to use discriminatory taxation. If countries can provide fiscal incentives for attracting new firms, this stabilizes existing agglomeration advantages, but may erode the fiscal revenue in the equilibrium. JEL Codes: Dynamic tax competition, vintage capital, agglomeration, foreign direct investment, bidding for firms
Springer eBooks, 2001
In Tullock's rent-seeking model, the probability a player wins the game depends on expenditures r... more In Tullock's rent-seeking model, the probability a player wins the game depends on expenditures raised to the power R. We show that a symmetric mixed-strategy Nash equilibrium, exists when R > 2, and that overdissipation of rents does not arise in any Nash equilibrium. We derive a tight lower bound on the level of rent dissipation that arises in a symmetric equilibrium when the strategy space is discrete, and show that full rent dissipation occurs when the strategy space is continuous. Our results are shown to be consistent with recent experimental evidence on the dissipation of rents.
Public Choice, Oct 5, 2018
We experimentally test the qualitatively different equilibrium predictions of two theoretical mod... more We experimentally test the qualitatively different equilibrium predictions of two theoretical models of attack and defense of a weakest-link network of targets. In such a network, the attacker's objective is to successfully attack at least one target and the defender's objective is to defend all targets. The models differ in how the conflict at each target is modeled-specifically, the lottery and auction contest success functions (CSFs). Consistent with equilibrium in the auction CSF model, attackers utilize a stochastic "guerrilla-warfare" strategy, which involves randomly attacking at most one target with a random level of force. Inconsistent with equilibrium in the lottery CSF model, attackers use the "guerrilla-warfare" strategy and attack only one target instead of the equilibrium "complete-coverage" strategy that attacks all targets. Consistent with equilibrium in both models, as the attacker's valuation increases, the average resource expenditure, the probability of winning, and the average payoff increase (decrease) for the attacker (defender).
Economic Theory, Oct 20, 2011
This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetri... more This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetric resources in which players maximize the expected number of battlefields won. The experimental results support the main qualitative predictions of the theory. In the auction treatment, where winning a battlefield is deterministic, disadvantaged players use a "guerilla warfare" strategy which stochastically allocates zero resources to a subset of battlefields. Advantaged players employ a "stochastic complete coverage" strategy, allocating random, but positive, resource levels across the battlefields. In the lottery treatment, where winning a battlefield is probabilistic, both players divide their resources equally across all battlefields. However, we also find interesting behavioral deviations from the theory and discuss their implications.
Economic Theory, Aug 1, 1996
RePEc: Research Papers in Economics, Aug 3, 1995
ABSTRACT The state of the art of rendering fiat money valuable is either to impose a boundary con... more ABSTRACT The state of the art of rendering fiat money valuable is either to impose a boundary condition or to make the boundary condition unimportant through an infinite sequence of markets so as to circumvent backward induction. We show fiat exchange may nevertheless arise in finite economies if agents have incomplete information about their relative position in the trade cycle or when the barter and autarky equilibria of the one-shot trading round support a monetary equilibrium with repeated trades. Copyright 2002, Oxford University Press.
RePEc: Research Papers in Economics, 1992
RePEc: Research Papers in Economics, Nov 21, 2000
A simple auction-theoretic framework is used to examine symmetric litigation environments where t... more A simple auction-theoretic framework is used to examine symmetric litigation environments where the legal ownership of a disputed asset is unknown by the court. The court observes only the quality of the case presented by each party, and awards the asset to the party presenting the best case. Rational litigants influence the quality of their cases by hiring skillful attorneys. This framework permits us to compare the equilibrium legal expenditures that arise under a continuum of legal systems. The British rule, American rule, and some recently proposed legal reforms are special cases of our model.
RePEc: Research Papers in Economics, 2012
This article investigates the impact of the distribution of preferences on equilibrium behavior i... more This article investigates the impact of the distribution of preferences on equilibrium behavior in conflicts that are modeled as all-pay auctions with identity-dependent externalities. In this context, we define centrists and radicals using a willingness-topay criterion that admits preferences more general than a simple ordering on the line. Through a series of examples, we show that substituting the auction contest success function for the lottery contest success function in a conflict may alter the relative expenditures of centrists and radicals in equilibrium. Extremism, characterized by a higher per capita expenditure by radicals than centrists, may persist and lead to a higher aggregate expenditure by radicals, even when they are relatively small in number. Moreover, we show that centrists may in the aggregate expend zero, even if they vastly outnumber radicals. Our results demonstrate the importance of the choice of the institutions of conflict, as modeled by the contest success function, in determining the role of extremism and moderation in economic, political, and social environments.
RePEc: Research Papers in Economics, 2005
This paper studies electoral competition in a model of redistributive politics with deterministic... more This paper studies electoral competition in a model of redistributive politics with deterministic voting and heterogeneous voter loyalties to political parties. We construct a natural measure of party strength based on the sizes and intensities of a party’s loyal voter segments and demonstrate how party behavior varies with the two parties’ strengths. In equilibrium, parties target or poach a strict subset of the opposition party’s loyal voters: offering those voters a high expected transfer, while freezing out the remainder with a zero transfer. The size of the subset of opposition voters frozen out and, consequently, the level of inequality in utilities generated by a party’s equilibrium redistribution schedule is increasing in the opposition party’s strength. We also construct a measure of political polarization that is increasing in the sum and symmetry of the parties’ strengths, and find that the expected ex-post inequality in utilities of the implemented policy is increasing in political polarization.
RePEc: Research Papers in Economics, 1995
ABSTRACT We examine the implications of replacing the Cournot market clearing assumption with Ber... more ABSTRACT We examine the implications of replacing the Cournot market clearing assumption with Bertrand-Edgeworth behavior when production is time-consuming. The benchmark is Saloner's result that when two firms simultaneously choose quantities in each of two periods before the market clears, every point on the outer envelope of the reaction functions between the Stackelberg outcomes is sustainable in equilibrium (Saloner, 1987). We demonstrate that in a symmetric Bertrand-Edgeworth duopoly, for small capacity costs, except for the leader-follower points, none of the points on the outer envelope of the best responses lying in the mixed strategy region are sustainable in equilibrium.
![Research paper thumbnail of An experimental investigation of Colonel Blotto games [Eine experimentelle Untersuchung von „Colonel Blotto“-Spielen]](https://attachments.academia-assets.com/107940920/thumbnails/1.jpg)
](RePEc: Research Papers in Economics, 2009
This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetri... more This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetric resources in which players maximize the expected number of battlefields won. The experimental results support all major theoretical predictions. In the auction treatment, where winning a battlefield is deterministic, disadvantaged players use a "guerilla warfare" strategy which stochastically allocates zero resources to a subset of battlefields. Advantaged players employ a "stochastic complete coverage" strategy, allocating random, but positive, resource levels across the battlefields. In the lottery treatment, where winning a battlefield is probabilistic, both players divide their resources equally across all battlefields.
RePEc: Research Papers in Economics, Aug 1, 2010
This paper examines a game-theoretic model of attack and defense of multiple networks of targets ... more This paper examines a game-theoretic model of attack and defense of multiple networks of targets in which there exist intra-network strategic complementarities among targets. The defender's objective is to successfully defend all of the networks and the attacker's objective is to successfully attack at least one network of targets. In this context, our results highlight the importance of modeling asymmetric attack and defense as a conflict between "fully" strategic actors with endogenous entry and force expenditure decisions as well as allowing for general correlation structures for force expenditures within and across the networks of targets.
This paper examines the effects of a proportional capital gains tax in an economy with an Austria... more This paper examines the effects of a proportional capital gains tax in an economy with an Austrian sector (with wine and trees) and an ordinary sector. We analyze the effect of capital gains taxation (on both an accrual and a realization basis) on the efficiency with which resources are used within the Austrian sector. Since time is the only input which can be varied in the Austrian sector this amounts to looking at the effect of capital gains taxation on the harvesting time or selling time of assets. Accrual taxation decreases the selling time of Austrian assets. Realization taxation decreases the selling time of some Austrian assets and leaves it unchanged for others. Inflation further reduces the selling time of assets taxed on an accrual basis; often, but not always, inflation increases the selling time of Austrian assets taxed on a realization basis. These results suggest that the capital gains tax can reduce the holding period of an asset. However, there is a sense in which such taxes (at least when levied on a realization basis) discourage transactions and increase holding periods. It is never profitable to change the ownership of an Austrian asset between the time of the original investment and the ultimate harvesting of the asset for final use. We examine the effect of capital gains taxation on the efficiency of the allocation of investment between sectors. No neutrality principles emerge when ordinary investment income is taxed at the same rate as capital gains income. We also analyze the effect of the special tax treatment of capital gains at death and find that the current U.S. tax system, under which capital gains taxes are waived at death, encourages investors to hold assets longer than they otherwise would.
Social Science Research Network, 2018
We study group competition with a single public good prize, perfectly discriminating contest succ... more We study group competition with a single public good prize, perfectly discriminating contest success function, and the weakest-link effort technology, in which the marginal cost of effort for each player is private information. We focus on pure strategy Bayes-Nash equilibria and show that teammates always employ symmetric strategies. Various degrees of coordination are possible, ranging from all cost types coordinating on a single effort level to every cost type choosing a distinct effort level. Such coordination may not enhance welfare. If groups are symmetric except for group size, players in the smaller group bid more aggressively than those in the larger group, but when the asymmetries are along multiple dimensions, no clear-cut conclusions can be made with respect to the effects of group sizes and valuations. As an additional avenue for cooperation, we investigate incentives to share private information via cheap talk among teammates, who then coordinate on the effort level most preferred by the player with the largest cost. A single group sharing information does better. But when players within each group cooperate in this fashion, all within-group gains are lost to increased competition between groups.
RePEc: Research Papers in Economics, 1995
Social Science Research Network, 1983
This paper examines the effects of a proportional capital gains tax in an economy with an Austria... more This paper examines the effects of a proportional capital gains tax in an economy with an Austrian sector (with wine and trees) and an ordinary sector. We analyze the effect of capital gains taxation (on both an accrual and a realization basis) on the efficiency with which resources are used within the Austrian sector. Since time is the only input which can be varied in the Austrian sector this amounts to looking at the effect of capital gains taxation on the harvesting time or selling time of assets. Accrual taxation decreases the selling time of Austrian assets. Realization taxation decreases the selling time of some Austrian assets and leaves it unchanged for others. Inflation further reduces the selling time of assets taxed on an accrual basis; often, but not always, inflation increases the selling time of Austrian assets taxed on a realization basis. These results suggest that the capital gains tax can reduce the holding period of an asset. However, there is a sense in which such taxes (at least when levied on a realization basis) discourage transactions and increase holding periods. It is never profitable to change the ownership of an Austrian asset between the time of the original investment and the ultimate harvesting of the asset for final use. We examine the effect of capital gains taxation on the efficiency of the allocation of investment between sectors. No neutrality principles emerge when ordinary investment income is taxed at the same rate as capital gains income. We also analyze the effect of the special tax treatment of capital gains at death and find that the current U.S. tax system, under which capital gains taxes are waived at death, encourages investors to hold assets longer than they otherwise would.
Social Science Research Network, 2013
We derive a necessary and sufficient condition for the existence of equilibria with only two acti... more We derive a necessary and sufficient condition for the existence of equilibria with only two active players in the all-pay auction with complete information and identity-dependent externalities. This condition shows that the generic equilibrium of the standard all-pay auction is robust to the introduction of "small" identity-dependent externalities. In general, however, the presence of identity-dependent externalities invalidates well-established qualitative results concerning the set of equilibria of the first-price all-pay auction with complete information. With identity-dependent externalities equilibria are generally not payoff equivalent, and identical players may earn different payoffs in equilibrium. These observations show that Siegel's (2009) results characterizing the set of equilibrium payoffs in all-pay contests, including the all-pay auction as a special case, do not extend to environments with identity-dependent externalities. We further compare the all-pay auction with identity-dependent externalities to the first-price winner-pay auction with identity-dependent externalities. We demonstrate that the equilibrium payoffs of the all-pay auction and winner-pay auction cannot be ranked unambiguously in the presence of identity-dependent externalities by providing examples of environments where equilibrium payoffs in the all-pay auction dominate those in the winner-pay auction and vice versa.
Economic Theory, Jun 20, 2020
Social Science Research Network, 2010
Countries compete for new FDI investment, whereas stocks of FDI generate agglomeration benefits a... more Countries compete for new FDI investment, whereas stocks of FDI generate agglomeration benefits and are potentially subject to extortionary taxation. We study the interaction between these aspects in a simple vintage capital framework with discrete time and an infinite horizon, focussing on Markov perfect equilibrium. We show that the equilibrium taxation destabilizes agglomeration advantages. The agglomeration advantage is valuable, but is exploited in the short run. The tax revenue in the equilibrium is substantial, and higher on "old" FDI than on "new" FDI, even though countries are not allowed to use discriminatory taxation. If countries can provide fiscal incentives for attracting new firms, this stabilizes existing agglomeration advantages, but may erode the fiscal revenue in the equilibrium. JEL Codes: Dynamic tax competition, vintage capital, agglomeration, foreign direct investment, bidding for firms
Springer eBooks, 2001
In Tullock's rent-seeking model, the probability a player wins the game depends on expenditures r... more In Tullock's rent-seeking model, the probability a player wins the game depends on expenditures raised to the power R. We show that a symmetric mixed-strategy Nash equilibrium, exists when R > 2, and that overdissipation of rents does not arise in any Nash equilibrium. We derive a tight lower bound on the level of rent dissipation that arises in a symmetric equilibrium when the strategy space is discrete, and show that full rent dissipation occurs when the strategy space is continuous. Our results are shown to be consistent with recent experimental evidence on the dissipation of rents.
Public Choice, Oct 5, 2018
We experimentally test the qualitatively different equilibrium predictions of two theoretical mod... more We experimentally test the qualitatively different equilibrium predictions of two theoretical models of attack and defense of a weakest-link network of targets. In such a network, the attacker's objective is to successfully attack at least one target and the defender's objective is to defend all targets. The models differ in how the conflict at each target is modeled-specifically, the lottery and auction contest success functions (CSFs). Consistent with equilibrium in the auction CSF model, attackers utilize a stochastic "guerrilla-warfare" strategy, which involves randomly attacking at most one target with a random level of force. Inconsistent with equilibrium in the lottery CSF model, attackers use the "guerrilla-warfare" strategy and attack only one target instead of the equilibrium "complete-coverage" strategy that attacks all targets. Consistent with equilibrium in both models, as the attacker's valuation increases, the average resource expenditure, the probability of winning, and the average payoff increase (decrease) for the attacker (defender).
Economic Theory, Oct 20, 2011
This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetri... more This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetric resources in which players maximize the expected number of battlefields won. The experimental results support the main qualitative predictions of the theory. In the auction treatment, where winning a battlefield is deterministic, disadvantaged players use a "guerilla warfare" strategy which stochastically allocates zero resources to a subset of battlefields. Advantaged players employ a "stochastic complete coverage" strategy, allocating random, but positive, resource levels across the battlefields. In the lottery treatment, where winning a battlefield is probabilistic, both players divide their resources equally across all battlefields. However, we also find interesting behavioral deviations from the theory and discuss their implications.
Economic Theory, Aug 1, 1996
RePEc: Research Papers in Economics, Aug 3, 1995
ABSTRACT The state of the art of rendering fiat money valuable is either to impose a boundary con... more ABSTRACT The state of the art of rendering fiat money valuable is either to impose a boundary condition or to make the boundary condition unimportant through an infinite sequence of markets so as to circumvent backward induction. We show fiat exchange may nevertheless arise in finite economies if agents have incomplete information about their relative position in the trade cycle or when the barter and autarky equilibria of the one-shot trading round support a monetary equilibrium with repeated trades. Copyright 2002, Oxford University Press.
RePEc: Research Papers in Economics, 1992
RePEc: Research Papers in Economics, Nov 21, 2000
A simple auction-theoretic framework is used to examine symmetric litigation environments where t... more A simple auction-theoretic framework is used to examine symmetric litigation environments where the legal ownership of a disputed asset is unknown by the court. The court observes only the quality of the case presented by each party, and awards the asset to the party presenting the best case. Rational litigants influence the quality of their cases by hiring skillful attorneys. This framework permits us to compare the equilibrium legal expenditures that arise under a continuum of legal systems. The British rule, American rule, and some recently proposed legal reforms are special cases of our model.
RePEc: Research Papers in Economics, 2012
This article investigates the impact of the distribution of preferences on equilibrium behavior i... more This article investigates the impact of the distribution of preferences on equilibrium behavior in conflicts that are modeled as all-pay auctions with identity-dependent externalities. In this context, we define centrists and radicals using a willingness-topay criterion that admits preferences more general than a simple ordering on the line. Through a series of examples, we show that substituting the auction contest success function for the lottery contest success function in a conflict may alter the relative expenditures of centrists and radicals in equilibrium. Extremism, characterized by a higher per capita expenditure by radicals than centrists, may persist and lead to a higher aggregate expenditure by radicals, even when they are relatively small in number. Moreover, we show that centrists may in the aggregate expend zero, even if they vastly outnumber radicals. Our results demonstrate the importance of the choice of the institutions of conflict, as modeled by the contest success function, in determining the role of extremism and moderation in economic, political, and social environments.
RePEc: Research Papers in Economics, 2005
This paper studies electoral competition in a model of redistributive politics with deterministic... more This paper studies electoral competition in a model of redistributive politics with deterministic voting and heterogeneous voter loyalties to political parties. We construct a natural measure of party strength based on the sizes and intensities of a party’s loyal voter segments and demonstrate how party behavior varies with the two parties’ strengths. In equilibrium, parties target or poach a strict subset of the opposition party’s loyal voters: offering those voters a high expected transfer, while freezing out the remainder with a zero transfer. The size of the subset of opposition voters frozen out and, consequently, the level of inequality in utilities generated by a party’s equilibrium redistribution schedule is increasing in the opposition party’s strength. We also construct a measure of political polarization that is increasing in the sum and symmetry of the parties’ strengths, and find that the expected ex-post inequality in utilities of the implemented policy is increasing in political polarization.
RePEc: Research Papers in Economics, 1995
ABSTRACT We examine the implications of replacing the Cournot market clearing assumption with Ber... more ABSTRACT We examine the implications of replacing the Cournot market clearing assumption with Bertrand-Edgeworth behavior when production is time-consuming. The benchmark is Saloner's result that when two firms simultaneously choose quantities in each of two periods before the market clears, every point on the outer envelope of the reaction functions between the Stackelberg outcomes is sustainable in equilibrium (Saloner, 1987). We demonstrate that in a symmetric Bertrand-Edgeworth duopoly, for small capacity costs, except for the leader-follower points, none of the points on the outer envelope of the best responses lying in the mixed strategy region are sustainable in equilibrium.
RePEc: Research Papers in Economics, 2009
This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetri... more This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetric resources in which players maximize the expected number of battlefields won. The experimental results support all major theoretical predictions. In the auction treatment, where winning a battlefield is deterministic, disadvantaged players use a "guerilla warfare" strategy which stochastically allocates zero resources to a subset of battlefields. Advantaged players employ a "stochastic complete coverage" strategy, allocating random, but positive, resource levels across the battlefields. In the lottery treatment, where winning a battlefield is probabilistic, both players divide their resources equally across all battlefields.
RePEc: Research Papers in Economics, Aug 1, 2010
This paper examines a game-theoretic model of attack and defense of multiple networks of targets ... more This paper examines a game-theoretic model of attack and defense of multiple networks of targets in which there exist intra-network strategic complementarities among targets. The defender's objective is to successfully defend all of the networks and the attacker's objective is to successfully attack at least one network of targets. In this context, our results highlight the importance of modeling asymmetric attack and defense as a conflict between "fully" strategic actors with endogenous entry and force expenditure decisions as well as allowing for general correlation structures for force expenditures within and across the networks of targets.
This paper examines the effects of a proportional capital gains tax in an economy with an Austria... more This paper examines the effects of a proportional capital gains tax in an economy with an Austrian sector (with wine and trees) and an ordinary sector. We analyze the effect of capital gains taxation (on both an accrual and a realization basis) on the efficiency with which resources are used within the Austrian sector. Since time is the only input which can be varied in the Austrian sector this amounts to looking at the effect of capital gains taxation on the harvesting time or selling time of assets. Accrual taxation decreases the selling time of Austrian assets. Realization taxation decreases the selling time of some Austrian assets and leaves it unchanged for others. Inflation further reduces the selling time of assets taxed on an accrual basis; often, but not always, inflation increases the selling time of Austrian assets taxed on a realization basis. These results suggest that the capital gains tax can reduce the holding period of an asset. However, there is a sense in which such taxes (at least when levied on a realization basis) discourage transactions and increase holding periods. It is never profitable to change the ownership of an Austrian asset between the time of the original investment and the ultimate harvesting of the asset for final use. We examine the effect of capital gains taxation on the efficiency of the allocation of investment between sectors. No neutrality principles emerge when ordinary investment income is taxed at the same rate as capital gains income. We also analyze the effect of the special tax treatment of capital gains at death and find that the current U.S. tax system, under which capital gains taxes are waived at death, encourages investors to hold assets longer than they otherwise would.
Social Science Research Network, 2018
We study group competition with a single public good prize, perfectly discriminating contest succ... more We study group competition with a single public good prize, perfectly discriminating contest success function, and the weakest-link effort technology, in which the marginal cost of effort for each player is private information. We focus on pure strategy Bayes-Nash equilibria and show that teammates always employ symmetric strategies. Various degrees of coordination are possible, ranging from all cost types coordinating on a single effort level to every cost type choosing a distinct effort level. Such coordination may not enhance welfare. If groups are symmetric except for group size, players in the smaller group bid more aggressively than those in the larger group, but when the asymmetries are along multiple dimensions, no clear-cut conclusions can be made with respect to the effects of group sizes and valuations. As an additional avenue for cooperation, we investigate incentives to share private information via cheap talk among teammates, who then coordinate on the effort level most preferred by the player with the largest cost. A single group sharing information does better. But when players within each group cooperate in this fashion, all within-group gains are lost to increased competition between groups.
RePEc: Research Papers in Economics, 1995
Social Science Research Network, 1983
This paper examines the effects of a proportional capital gains tax in an economy with an Austria... more This paper examines the effects of a proportional capital gains tax in an economy with an Austrian sector (with wine and trees) and an ordinary sector. We analyze the effect of capital gains taxation (on both an accrual and a realization basis) on the efficiency with which resources are used within the Austrian sector. Since time is the only input which can be varied in the Austrian sector this amounts to looking at the effect of capital gains taxation on the harvesting time or selling time of assets. Accrual taxation decreases the selling time of Austrian assets. Realization taxation decreases the selling time of some Austrian assets and leaves it unchanged for others. Inflation further reduces the selling time of assets taxed on an accrual basis; often, but not always, inflation increases the selling time of Austrian assets taxed on a realization basis. These results suggest that the capital gains tax can reduce the holding period of an asset. However, there is a sense in which such taxes (at least when levied on a realization basis) discourage transactions and increase holding periods. It is never profitable to change the ownership of an Austrian asset between the time of the original investment and the ultimate harvesting of the asset for final use. We examine the effect of capital gains taxation on the efficiency of the allocation of investment between sectors. No neutrality principles emerge when ordinary investment income is taxed at the same rate as capital gains income. We also analyze the effect of the special tax treatment of capital gains at death and find that the current U.S. tax system, under which capital gains taxes are waived at death, encourages investors to hold assets longer than they otherwise would.
Social Science Research Network, 2013
We derive a necessary and sufficient condition for the existence of equilibria with only two acti... more We derive a necessary and sufficient condition for the existence of equilibria with only two active players in the all-pay auction with complete information and identity-dependent externalities. This condition shows that the generic equilibrium of the standard all-pay auction is robust to the introduction of "small" identity-dependent externalities. In general, however, the presence of identity-dependent externalities invalidates well-established qualitative results concerning the set of equilibria of the first-price all-pay auction with complete information. With identity-dependent externalities equilibria are generally not payoff equivalent, and identical players may earn different payoffs in equilibrium. These observations show that Siegel's (2009) results characterizing the set of equilibrium payoffs in all-pay contests, including the all-pay auction as a special case, do not extend to environments with identity-dependent externalities. We further compare the all-pay auction with identity-dependent externalities to the first-price winner-pay auction with identity-dependent externalities. We demonstrate that the equilibrium payoffs of the all-pay auction and winner-pay auction cannot be ranked unambiguously in the presence of identity-dependent externalities by providing examples of environments where equilibrium payoffs in the all-pay auction dominate those in the winner-pay auction and vice versa.