grand innovation prizes a theoretical normative and empirical evaluation abstract this paper provides a systematic examination of the use of a grand innovation prize gip in action the progressive automotive insurance x prize a 10 million prize for a highly efficient vehicle following a mechanism design approach we define three key dimensions for gip evaluation objectives design and performance where prize design includes ex ante specifications ex ante incentives qualification rules and award governance within this framework we compare observations of gips from three domains empirical reality theory and policy to better understand their function as an incentive mechanism for encouraging new solutions to large scale social challenges combining data from direct observation personal interviews and surveys together with analysis of extant theory and policy documents on gips our results highlight three points of divergence first over the complexity of defining prize specifications secondly over the nature and role of incentives particularly patents thirdly the overlooked challenges associated with prize governance our approach identifies a clear roadmap for future theory and policy around gips

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

semi targeted all pay auctions a partial exclusion principle abstract this paper studies the effects of a specific affirmative action policy in complete information all pay auctions when players differ in ability the contest organizer splits the overall prize of the competition into a targeted and an untargeted prize the targeted prize is exclusively for disadvantaged low ability agents and excludes advantaged agents partially from the overall prize we consider a setting with one high ability and two low ability contestants and fully characterize equilibrium assuming that the contest organizer aims to maximize expected total effort we show that i almost any targeted prize is preferable to a standard all pay auction without targeted prize ii the exclusion principle baye et al 1993 can be implemented by a wide range of sufficiently large targeted prizes and iii partial exclusion by means of an appropriately chosen targeted prize benefits the organizer more than complete exclusion we also discuss the robustness of our results in settings with more than three agents

two bidder all pay auctions with interdependent valuations including the highly competitive case abstract we analyze symmetric two bidder all pay auctions with interdependent valuations and discrete type spaces relaxing previous restrictions on the distribution of types and the valuation structure we present a construction that characterizes all symmetric equilibria we show how the search problem this construction faces can be complex in equilibrium randomization can take place over disjoint intervals of bids equilibrium supports can have a rich structure and non monotonicity of the equilibrium may result in a positive probability of allocative inefficiency when the value of the prize is not common particular attention is paid to the case in which an increase in a bidder s posterior expected value of winning the auction is likely to be accompanied by a corresponding increase for the other bidder such environments are highly competitive in the sense that the bidder s higher valuation also signals that the other bidder has an incentive to bid aggressively

rent seeking and rent dissipation a neutrality result abstract we consider rent seeking contests between at least two agents who might value the prize differently we capture a wide range of institutional aspects of contests by analyzing a class of contest success functions fulfilling several properties the main properties are anonymity and a condition on the elasticity of a rent seeker s win probability with respect to her effort we show the existence of a mixed strategy equilibrium and establish equilibrium payoffs in this equilibrium complete rent dissipation holds our results imply a partial robustness result for the all pay auction

soft money and campaign finance reform we analyze special interest influence on policy when political contributions are capped but the regulation contains soft money loopholes the politician chooses between two policy options we define special interest influence as the probability the politician chooses the policy he would not have chosen in the absence of contributions any binding cap reduces special interest influence but the effect may be nonmonotonic a ban on contributions can result in greater special interest influence than a binding but nonzero cap the results may also have implications for the policy response to the 2010 supreme court ruling on citizens united v fec

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

caps on political lobbying comment following the 1999 israeli elections the winning candidate s ehud barak s party was fined 3 2 million dollars for violating israel s campaign financing laws by exceeding the spending cap imposed and raising 1 2 million dollars illegally see time europe 2000 while adhering to the strict ncaa recruiting regulations the university of oregon spent 3 million dollars to make their football locker room the best anywhere including the nfl lexington herald leader 2003 when asked about the previous salary cap in the uk football league players said that it the cap was so artificial that clubs paid money in brown paper envelopes bbc2 newsnight 2002 in all these cases there officially existed a rigid spending cap however they show that even though a cap exists the cap might not be easily enforced when enforced the penalty may just be financial rather than a change in outcome the cap may be enforced and adhered to but there may also be alternate perhaps less effective hence more costly means of spending we also see that the flexible nature of the cap is often built into the rules by examining the salary caps of the four major us sports leagues where the caps are routinely exceeded in baseball and basketball surpassing the cap invokes a pure financial penalty called a luxury tax which is proportional to the excess in football while the cap is stated in terms of salaries many teams use signing bonuses as a way to circumvent it in ice hockey there is a dual cap system where the luxury tax is invoked on salaries falling between the two caps and signing bonuses are an allowed method to exceed the

heterogeneous risk loss aversion in complete information all pay auctions we extend previous theoretical work on n player complete information all pay auctions to incorporate heterogeneous risk and loss averse utility functions we provide sufficient and necessary conditions for the existence of equilibria with a given set of active players with any strictly increasing utility functions and characterize the players equilibrium mixed strategies assuming that players can be ordered by their risk aversion player a is more risk averse than player b if whenever player b prefers a certain payment over a given lottery so does player a we find that in equilibrium the more risk averse players either bid higher than the less risk averse players and win with higher ex ante probability or they drop out furthermore while each player s expected bid decreases with the other players risk aversion her expected bid increases with her own risk aversion thus increasing a player s risk aversion creates two opposing effects on total expected bid a sufficient condition for the total expected bid to decrease with a player s risk aversion is that this player is relatively more risk averse compared to the rest of the players our findings have important implications for the literature on gender differences in competitiveness and for gender diversity in firms that use personnel contests for promotions

incentives and careers in academia theory and empirical analysis we study career concerns in italian academia we mould our empirical analysis on the standard model of contests formalised in the multi unit all pay auction the number of posts the number of app

competitive effect of cross shareholdings in all pay auctions with complete information abstract this paper investigates the competitive effect of cross shareholdings in winner take all all pay auctions with two asymmetric bidders we show that cross shareholdings may paradoxically create a pro competitive effect and elicit more effort than a standard contest without cross ownership this observation runs in contrast to the anti competitive effect that cross shareholdings usually create in standard oligopolistic settings such as cournot or bertrand competitions both bidding costs and the sizes of cross shares affect the resultant total effort non monotonically neither a cross share nor a higher bidding cost necessarily decreases effort supply a complete account of equilibrium bidding behaviors is provided and the necessary and sufficient conditions under which cross shareholdings lead to higher or lower levels of overall effort are identified however the pro competitive effect comes at a loss of efficiency

caps on political lobbying reply yeon koo che and ian l gale 1998 cg hereafter studied the impact of imposing a cap on lobbying expenditures they showed that a cap may lead to a greater expected aggregate expenditure and b a less efficient allocation of a political prize in their comment todd kaplan and david wettstein 2006 kw hereafter show that if the cap is not rigid i e its impact on the cost of lobbying is continuous it has no effect kw employ the same basic framework as cg except for the assumption that a bid of x costs a lobbyist c x for a strictly increasing continuous function c imposition of a cap raises costs to the strictly increasing continuous function c to see why the cap has no effect on lobbying expenditures in that setting think of a lobbyist choosing a cost c 0 rather than a bid the lobbyist who chooses the higher cost necessarily makes the higher bid because the lobbyists have the same strictly increasing cost function the functional relationship between bids and costs does not matter so the cap has no effect we explore the reasons for the different results and we show that cg s results can still hold in a more general environment two components underlie cg s analysis a a cap will constrain the stronger lobbyist thereby leveling the playing field and b this will intensify competition raising the expected aggregate expenditure in the case of kw s nonrigid cap the first effect does not arise since the stronger lobbyist can always outspend the weaker one this does not vitiate the second component however as will be seen when the cap has an equalizing effect it will intensify competition with the predicted effect on expenditures below we characterize the precise nature of an equalizing shift in costs more important we will describe plausible circumstances under which a nonrigid cap can generate an equalizing shift when lobbyists differ in their costs of lobbying for instance one lobbyist could be a more effective fundraiser than the other in such a case a cap on lobbying reduces the competitive gap between the lobbyists and it may cause the expected aggregate expenditure and the probability of misallocation to rise just as in cg

uncertainty polarization and proposal incentives under quadratic voting we consider the quadratic voting mechanism lalley and weyl in quadratic voting working paper university of chicago 2015 weyl in the robustness of quadratic voting working paper university of chicago 2015 and focus on the incentives it provides individuals deciding what proposals or candidates to put up for a vote the incentive compatibility of quadratic voting rests upon the assumption that individuals value the money used to buy votes while the budget balance efficiency of the mechanism requires that the money spent by one voter by redistributed among the other voters from these assumptions we show that it follows that strategic proposers will have an incentive to offer proposals with greater uncertainty about individual values similarly we show that in an electoral setting quadratic voting provides an incentive to propose candidates with polarized non convergent platforms

distributional preferences in probabilistic and share contests we analyze nash equilibria of probabilistic and share contests where players have distributional preferences if players are sufficiently similar distributional preferences create multiple equilibria for the case of only mildly heterogeneous players equilibrium effort can be lower as well as higher than effort exerted by players with selfish preferences these findings can explain the following three anomalies observed in empirical tests of probabilistic and share contests the large variance of effort levels overspreading individual spending that exceeds the nash equilibrium prediction overspending and aggregate spending that exceeds the value of the prize overdissipation if players are sufficiently heterogeneous the game has a unique equilibrium that is more egalitarian than the selfish nash equilibrium it turns out that the less talented competitor may win the larger share of the prize if his inequality aversion is sufficiently strong we analyze how the equilibria evolve if the number of players becomes larger and how sequential moves influence behavior two new insights follow from the analysis of the sequential move game first sequential moves act as a coordination device in case of multiple simultaneous equilibria and second inequality aversion of the more egalitarian player can be used as a commitment device for low effort this effect can reverse the conventional wisdom that the underdog should lead

contests with small noise and the robustness of the all pay auction this paper considers all pay contests in which the relationship between bids and allocations reflects a small amount of noise prior work had focused on one particular equilibrium however there may be other equilibria to address this issue we introduce a new and intuitive measure for the proximity to the all pay auction this allows in particular to provide simple conditions under which actually any equilibrium of the contest is both payoff equivalent and revenue equivalent to the unique equilibrium of the corresponding all pay auction the results are shown to have powerful implications for monopoly licensing political lobbying electoral competition optimally biased contests the empirical analysis of rent seeking and dynamic contests

two stage residual inclusion estimation addressing endogeneity in health econometric modeling the paper focuses on two estimation methods that have been widely used to address endogeneity in empirical research in health economics and health services research two stage predictor substitution 2sps and two stage residual inclusion 2sri 2sps is the rote extension to nonlinear models of the popular linear two stage least squares estimator the 2sri estimator is similar except that in the second stage regression the endogenous variables are not replaced by first stage predictors instead first stage residuals are included as additional regressors in a generic parametric framework we show that 2sri is consistent and 2sps is not results from a simulation study and an illustrative example also recommend against 2sps and favor 2sri our findings are important given that there are many prominent examples of the application of inconsistent 2sps in the recent literature this study can be used as a guide by future researchers in health economics who are confronted with endogeneity in their empirical work

the optimal prize structure of symmetric tullock contests we show that the optimal prize structure of symmetric n player tullock tournaments assigns the entire prize pool to the winner provided that a symmetric pure strategy equilibrium exists if such an equilibrium fails to exist under the winner take all structure we construct the optimal prize structure which improves existence conditions by dampening efforts if no such optimal equilibrium exists no symmetric pure strategy equilibrium induces positive efforts

asymmetric contests with conditional investments rent seeking scenarios competitions for promotions and research and development r d races are examples of competitions in which participants expend resources regardless of whether they win or lose although similar in their all pay feature such competitions often differ in important dimensions these include the type of technologies employed in competition the type of asymmetries among competitors the degree to which expenditures are sunk and the number of prizes consider lobbying settings in which firms expend resources in order to influence a policymaker if expenditures take the form of monetary outlays and all firms have the same cost of capital then it is reasonable to think of firms marginal cost of influence as linear but if a firm has a reputational advantage and high costs of capital its lobbying technology may be more reasonably thought of as having convex costs relatively low marginal costs up to a moderate level of influence due to the reputational advantage and relatively high marginal costs at higher levels of influence due to the high costs of capital similarly the lobbying technology of a firm that is relatively unknown and has low costs of capital may be characterized by concave costs lobbying restrictions geographic location or preferential treatment by the policymaker further impact firms lobbying technologies inducing additional nonlinearities and asymmetries among firms in some lobbying settings firms also commit to expenditures conditional on a favorable outcome for example a firm may commit to building factories and creating new jobs if it is granted one of a limited number of manufacturing licenses thus the specification of firms lobbying technologies the type of asymmetries among firms the combination of unconditional and conditional investments and the number of eventual winners may change according to the lobbying setting studied the same is true for other competitions with an all pay feature in a competition for promotions workers often differ in their abilities experience and social skills more than one prize

contests for experimentation we study contests for innovation with learning about the innovation s feasibility and opponents outcomes we characterize contests that maximize innovation when the designer chooses a prize sharing scheme and a disclosure policy a public winner takes all contest dominates public contests where any success is immediately disclosed with any other prize sharing scheme as well as winner takes all contests with any other disclosure policy yet jointly modifying prize sharing and disclosure can increase innovation in a broad class of mechanisms it is optimal to share the prize with disclosure following a certain number of successes under simple conditions a hidden equal sharing contest is optimal

estimating functional forms in cost prices abstract klaus conrad 1983 developed the cost price approach based upon the notion of partially fixed factor proportions as an alternative to the traditional neoclassical method of modeling cost and production functions he showed that a simplified version of his model could be used to estimate a cobb douglas cost function in cost prices we have been able to estimate the full form of conrad s proposed model and extend his technique to the ces and generalized leontief cost functions we also illustrate how to model technical change in cost prices and in cost shares

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

the all pay auction with nonmonotonic payoff i model innovation contests as an all pay auction in which it is possible not to achieve successful innovation despite costly r d investments and as a result there is no winner in such a case the winning payoff turns out to be nonmonotonic in own bid i derive the sufficient conditions for the existence of pure strategy equilibria and fully characterize the nondegenerate mixed strategy equilibrium in the mixed strategy equilibrium the support of the low value bidder is not continuous and both the high value and the low value bidders place an atom in the distinct lower bound of their respective support under symmetric valuation both bidders place an atom at zero these results can explain why one does not observe very low quality innovation in real life or why even symmetric firms may stay out of an innovation contest

the lifeboat problem abstract we study an all pay contest with multiple identical prizes lifeboat seats prizes are partitioned into subsets of prizes lifeboats players play a two stage game first each player chooses an element of the partition a lifeboat then each player competes for a prize in the subset chosen a seat we characterize and compare the subgame perfect equilibria in which all players employ pure strategies or all players play identical mixed strategies in the first stage the partitioning of prizes can lead to coordination failure when players employ nondegenerate mixed strategies in these equilibria some rents are sheltered and rent dissipation is reduced

favoritism in asymmetric contests head starts and handicaps abstract i examine a contest with identity dependent rules in which contestants are privately informed and ex ante heterogeneous a contestant may suffer from a handicap or benefit from a head start the former reduces the contestant s score by a fixed percentage the latter is an additive bonus although total effort increases if the weak contestant is favored with a head start the optimal use of handicaps is not as clear cut depending on the nature of the asymmetry it may or may not be optimal to handicap the strong contestant moreover it is generally optimal to combine the two instruments for instance when contestants are sufficiently heterogeneous the weak contestant should be given both a head start and a handicap it may also be possible to induce higher effort and at the same time make both contestants better off ex ante

discrimination in a model of contests with incomplete information about ability we study contests with private information and identical contestants where contestants efforts and innate abilities generate output of varying qualities the designer s revenue depends on the quality of the output and she offers a reward to the contestant achieving the highest quality we characterize the equilibrium behavior outcomes and payoffs for both nondiscriminatory and discriminatory where the reward is contestant dependent contests we derive conditions under which the designer obtains a larger payoff when using a discriminatory contest and describe settings where these conditions are satisfied

correlated equilibrium as an expression of bayesian rationality if it is common knowledge that the players in a game are bayesian utility maximizers who treat uncertainty about other players actions like any other uncertainty then the outcome is necessarily a correlated equilibrium random strategies appear as an expression of each player s uncertainty about what the others will do not as the result of willful randomization use is made of the common prior assumption according to which differences in probability assessments by different individuals are due to the different information that they have where information may be interpreted broadly to include experience upbringing and genetic makeup copyright 1987 by the econometric society

integer game with delay in this note we study a version of a war of attrition in which the players pick delays and the player with the longest delay wins unlike the war of attrition all players have to experience the longest delay before the consumption takes place we show that the game has no mixed strategy nash equilibria the game can be seen as a re interpretation of the integer game which is one of the most important and most criticized constructions in the full implementation literature unlike the integer game it has a well defined best response against any mixed strategy

disclosure policy in a multi prize all pay auction with stochastic abilities this paper investigates whether a contest organizer should disclose private information about bidders abilities in a multi prize all pay auction bidders abilities are randomly distributed and observed by the contest organizer the organizer decides whether to disclose this information publicly we find that concealing the information elicits higher expected total effort regardless of the distribution of abilities in addition we find that the rent dissipation rate of the contest does not depend on the disclosure policy

tie breaks and bid caps in all pay auctions we revisit the complete information all pay auction with bid caps introduced by che and gale 1998 dropping their assumption that tie breaking must be symmetric any choice of tie breaking rule leads to a dierent set of nash equilibria compared to the optimal bid cap of che and gale we obtain that in order to maximize the sum of bids the designer prefers to set a less restrictive bid cap combined with a tie breaking rule which slightly favors the weaker bidder moreover the designer is better o breaking ties deterministically in favor of the weak bidder than symmetrically except when bidding costs are strongly convex jel classication d72 d44

democracy undone systematic minority advantage in competitive vote markets we study the competitive equilibrium of a market for votes where the choice is binary and it is known that a majority of the voters supports one of the two alternatives voters can trade votes for a numeraire before making a decision via majority rule we identify a sufficient condition guaranteeing the existence of an ex ante equilibrium in equilibrium only the most intense voter on each side demands votes and each demands enough votes to alone control a majority the equilibrium strongly resembles an all pay auction for decision power it makes clear that votes are only a medium for the allocation of power the probability of a minority victory is always higher than efficient and converges rapidly to one half as the electorate increases for any minority size the numerical advantage of the majority becomes irrelevant democracy is undone by the market

an analysis of cooperative research and development i analyze the effects of cooperative research whereby member firms agree to share the costs andfruits of a research project before they undertake it in this model industrywide agreements tend to have socially beneficial effects when the degree ofproduct market competition is low when there are r d spillovers in the absence of cooperation when a high degree of sharing is technologically feasible and when the agreement concerns basic research rather than development activities i show that a royalty free cross licensing agreement among any number offirms lowers the equilibrium level of innovation even though it increases the efficiency of r d through sharing

cost prices and partially fixed factor proportions in energy substitution abstract the objective of this paper is to propose a new approach which combines the approaches to neoclassical substitutability and fixed factor proportions this is done by separating the quantity of an input in a committed part linked to the other inputs and in an uncommitted part which is free for substitution on the cost side this implies that the effective price of an input consists of the own price and of weighted prices of the other inputs where the weights determine the order of magnitude of linkage of the other inputs to one unit of this input a cost function with these cost prices as arguments has been employed and elasticities of prices and substitution have been estimated with u s data originally used by berndt and wood

information alliances in contests with budget limits we study the role of information exchange that may occur in alliances in a contest without noise contestants learn their own limits of what they can spend in a contest they may also form alliances and learn the limits of all players who are within the same alliance then they decide independently about their own contest efforts alliance formation for the purpose of information exchange is beneficial for members of the same alliance and neutral for all other players also a merger between alliances is beneficial for their members further we identify and discuss the set of stable alliance combinations

participation in deterministic contests abstract this paper considers participation in deterministic contests for m 1 identical prizes which employ an auction like rule to determine the winners in most papers that investigate such models participation by precisely m 1 players is associated with players having complete information about their opponents characteristics and participation by more than m 1 players is associated with players having incomplete information about their opponents characteristics i show that incomplete information is in fact neither sufficient nor necessary for participation by more than m 1 players

the distribution of talent across contests do the contests with the largest prizes attract the most able contestants to what extent do contestants avoid competition in this paper we show theoretically and empirically that the distribution of abilities plays a crucial role in determining contest choice complete sorting exists only when the proportion of high ability contestants is sufficiently small as this proportion increases high ability contestants shy away from competition and sorting decreases such that reverse sorting becomes a possibility we test our theoretical predictions with a large panel data set containing contest choice over twenty years we use exogenous variation in the participation of highly able competitors to provide empirical evidence for the relationship among prizes competition and sorting

becoming a bad doctor we analyze a market with n rational rms doctors and a continuum of boundedly rational consumers patients following spiegler 2006a we assume that patients are not familiar with the market and rely on anecdotes we analyze the price setting game played by doctors with given dierent healing qualities doctors know their own quality as well as the qualities of their competitors in the unique equilibrium all doctors no matter how bad earn positive prots if doctors even costlessly choose their qualities doctors mainly oer mediocre qualities in all spne welfare may strictly decrease in the number of doctors

the optimal allocation of prizes in contests we study a contest with multiple not necessarily equal prizes contestants have private information about an ability parameter that affects their costs of bidding the contestant with the highest bid wins the first prize the contestant with the second highest bid wins the second prize and so on until all the prizes are allocated all contestants incur their respective costs of bidding the contest s designer maximizes the expected sum of bids our main results are 1 we display bidding equlibria for any number of contestants having linear convex or concave cost functions and for any distribution of abilities 2 if the cost functions are linear or concave then no matter what the distribution of abilities is it is optimal for the designer to allocate the entire prize sum to a single first prize 3 we give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function

scope and patterns of innovation cooperation in spanish service enterprises abstract examining 2148 innovating service firms from the spanish technological innovation panel 2004 this paper utilizes latent class analysis to appraise the scope of innovation cooperation in services in the spanish economy in accordance with the growing weight of external information flows throughout innovation processes the empirical evidence indicates that the nature of the service activity affects both the partner chosen and the cooperation intensity the results lead to the creation of a typology of cooperation composed of three broad profiles service firms intensive in techno scientific cooperation intensive in interactions with clients and a profile with low intensity in cooperation called lonely innovators the probability that a firm belongs to the latter profile is 59 which makes it reasonable to affirm that innovation cooperation is not a common practice in spanish innovating service enterprises innovation output variables have been included in order to examine the relationship between patterns of cooperation and innovation performance the findings also underline the co existence of different cooperation patterns within the same industry

optimal design of research contests procurement of an innovation often requires substantial effort by potential suppliers motivating effort may be difficult if the level of effort and quality of the resulting innovation are unverifiable if innovators cannot benefit directly by marketing their innovations and if the buyer cannot extract up front payments from suppliers we study the use of contests to procure an innovation in such an environment an auction in which two suppliers are invited to innovate and then bid their prizes is optimal in a large class of contests if contestants are asymmetric it is optimal to handicap the most efficient one

asymmetric all pay auctions with interdependent valuations abstract i show that a unique equilibrium exists in an asymmetric two player all pay auction with a discrete signal structure correlated signals and interdependent valuations the proof is constructive and the construction can be implemented as a computer program and be used to derive comparative statics i also characterize the set of equilibria when a reserve price is introduced

a tug of war team contest this paper analyzes a tug of war contest between two teams in each round of the tug of war a pair of agents from the opposing teams competes in a private value all pay auction with asymmetric value distributions and effort effectiveness whichever team arrives first at a given lead in terms of battle victories over the opponent wins the tug of war there exists a unique markov perfect equilibrium in bidding strategies which depend on the respective player s valuation and the current state of the tug of war we derive rich comparative statics for this equilibrium by using the fact that the state of the tug of war evolves according to a time homogeneous absorbing markov chain

estimating functional forms in cost prices abstract olson and shieh extended the cost price approach proposed by conrad and estimated systems of factor share equations in cost prices with a more theoretical consistent specification of technical change the authors concluded that the results encouraged additional research based on the cost price approach this paper questions empirical results for one of the models reported by olson and shieh empirical results for an alternative specification of the model are also presented

trial and settlement a study of high low agreements this paper presents the first systematic theoretical and empirical study of high low agreements in civil litigation a high low agreement is a private contract that if signed by litigants before the conclusion of a trial constrains the future damages payment to lie between a minimum and a maximum amount whereas the existing literature describes litigation as a choice between trial and settlement our examination of high low agreements a relatively new phenomenon in civil litigation introduces partial or incomplete settlements in our theoretical model trial is both costly and risky when litigants have divergent subjective beliefs and are mutually optimistic about their trial prospects cases may fail to settle in these cases high low agreements can be in the litigants mutual interest because they limit the risk of outlier damages awards while still allowing for an optimal degree of speculation using unique insurance claims data from a national insurance company we describe the features of these agreements and empirically investigate the factors that may influence whether litigants discuss or enter into high low agreements our empirical findings are consistent with the predictions of the theoretical model we also explore extensions and alternative explanations for high low agreements including their use to mitigate excessive offsetting trial expenditures

multi stage sequential all pay auctions abstract we study multi stage sequential all pay contests auctions where heterogeneous contestants are privately informed about a parameter ability that affects their cost of effort we characterize the perfect bayesian equilibrium of these contests and analyze the effect of the number of contestants and their types on the contestants expected highest effort

all pay contests this paper studies a class of games all pay contests which capture general asymmetries and sunk investments inherent in scenarios such as lobbying competition for market power labor market tournaments and r d races players compete for one of several identical prizes by choosing a score conditional on winning or losing it is weakly better to do so with a lower score this formulation allows for differing production technologies costs of capital prior investments attitudes toward risk and conditional and unconditional investments among others i provide a closed form formula for players equilibrium payoffs and analyze player participation a special case of contests is multiprize complete information all pay auctions

externalities in recruiting external recruiting at least weakly improves the quality of the pool of applicants but the incentive implications are less clear using a contest model this paper investigates the pure incentive effects of external recruiting our results show that if workers are heterogeneous opening up a firm s career system may lead to a homogenization of the pool of contestants and thus encourage the firm s high ability workers to exert more effort if this positive effect outweighs the discouragement of low ability workers the firm will benefit from external recruiting if however the discouragement effect dominates the homogenization effect the firm should disregard external recruiting in addition product market competition may mean that opening up the career system becomes less attractive for a firm since it increases the incentives of its competitors workers and hence strengthens the competitors

matching and price competition we develop a model in which firms set impersonal salary levels before matching with workers wages fall relative to any competitive equilibrium while profits rise almost as much implying little inefficiency furthermore the best firms gain the most from the system while wages become compressed in light of our results we discuss the performance of alternative institutions and the recent antitrust case against the national resident matching program

politician preferences law abiding lobbyists and caps on political contributions the effect of a contribution cap is analyzed in a political lobbying game where the politician has a policy preference in contrast to the previous literature without politician policy preferences more restrictive binding caps always reduce expected aggregate contributions however the initial imposition of a cap increases contributions if the politician mildly favors the low valuation lobbyist s policy the introduction of policy preferences permits analysis of monied interests policy influence a more restrictive cap makes it more likely that the politician enacts the policy he would have enacted in the absence of lobbying even in cases where expected aggregate contributions increase

who co operates for innovation and why an empirical analysis abstract in recent years there has been growing interest in co operative arrangements for innovation with some commentators arguing innovation is no longer the province of individual firms but depends increasingly on collective action this paper examines the response to the uk s version of the second european community innovation survey cis 2 to investigate the patterns of co operation between innovating firms and external partners the analysis shows the relationship between innovation and co operation is not straightforward from a subjective i e firm based perspective it is clear that most firms still develop their new products processes and services without forming formal co operative arrangements for innovation with other organisations however firms that engage in r d and that are attempting to introduce higher level innovations i e new to the market rather than new to the firm innovations are much more likely to engage in co operative arrangements for innovation consequently if an objective i e innovation based perspective is taken which weighs innovations by their significance then it is likely that a significant proportion of high level innovations are developed through co operative arrangements although unfortunately the cis 2 does not indicate the direct significance of these arrangements to the development of the innovations in summary the extent of co operative arrangements for innovation appears to depend on the type of firms being considered and on what is meant by innovation

gambling in contests with heterogeneous loss constraints i study the impact of asymmetric loss constraints on risk taking behavior in the contest model of seel and strack 2013 i derive the unique nash equilibrium outcome the equilibrium payoffs and comparative statics about the bankruptcy risk

co operative r d why and with whom an integrated framework of analysis abstract firms use r d partnerships to access knowledge and build global r d networks this article develops an integrated framework to examine the determinants of the choice of partners with which firms co operate on r d this resource based perspective underscores the interactions between three major questions why co operate who does and with whom it argues in particular that the choice of partners is dictated by the complementary resources which the latter command the framework is then expanded to predict the relative efficiency of r d co operation with different partners including suppliers clients rivals academic institutions and foreign firms the empirical analysis which is based on responses to france s version of the second european community innovation survey cis 2 strongly supports the overall framework of analysis

caps in sequential contests i introduction in many competitions we can often observe situations where severe constraints are imposed on contestants for example in the u s electoral campaign there is a specific maximum campaign contribution that a single agent can make to a candidate 1 in sports where equipment plays a major role e g sailing motor races etc explicit or implicit technological constraints are imposed on the allowed equipment also several sports leagues e g the national basketball association nba implement a salary cap which places a limit on the total amount of money a team can spend on players salaries salary caps are clearly binding and teams are sometimes forced to trade expensive players in order to make place for other needed team members the usual reason for applying salary caps is that they facilitate even competition between small and large city teams otherwise large city teams could pay more buy the best talent and ultimately destroy any semblance of competition in the league the goal of caps imposed by designers of competitions is to create what we call a competitive balance so that many players have a chance to win and not necessarily the strongest ones in addition if the contest is more competitively balanced the uncertainty of the outcome is higher and therefore the contest is more attractive furthermore competitive balance may lead to an improvement of the expected total performance of all the players rather than just the performance of the top player several other ways have been suggested to enhance the competitive balance in contests for example baye kovenock and de vries 1993 showed that in all pay auctions contests by excluding the strongest player the player with the highest value of winning the contest becomes more competitively balanced and then the players expected total bid may increase moldovanu and sela 2001 found that in all pay auctions under incomplete information when cost functions are convex several positive prizes may be optimal for a designer who wishes to maximize the expected total bid in other words by increasing the number of the prizes the chances of the players with relatively low values of winning to win one of the prizes increase and therefore these players will increase their efforts accordingly cohen kaplan and sela 2008 studied all pay auctions with effort dependent rewards under incomplete information and demonstrated that when the designer maximizes the total bid effort and when there is a sufficiently large number of contestants the optimal reward decreases in the contestants bid this means that a designer will offer higher prizes to the players with relatively low values of winning those who exert lower efforts than to the players with relatively high values of winning those who exert higher efforts such a distribution of prizes balances the bids submitted by the players with high and low values of winning we focus here on the role of bid caps to enhance the competitive balance in contests relatively weak players players with low abilities or low values of winning usually exert low efforts which are lower than the level of the bid cap imposed by a designer in a contest with a bid cap if these players exert an effort that is equal to the bid cap they will have a higher chance to win since no one can exert a higher effort than the bid cap thus the weak players exert more effort than they would in a contest without a bid cap however relatively strong players players with high abilities or high values of winning usually exert higher efforts than the level of the bid cap thus the strong players exert less effort than they would in a contest without a bid cap hence the effect of the bid cap on the players total effort depends on the trade off between the increase of the weaker players efforts and the decrease of the stronger players efforts to be fully effective the bid cap system must guarantee that as many players as possible raise their efforts to the level of the bid cap and as less as possible reduce their efforts to this level

firms motivations for cooperative r d an empirical analysis of spanish firms abstract the aim of this paper is to analyze the motives that have caused industrial firms to cooperate in r d there are many theoretical works devoted to the theme but few empirical studies have been carried out with large samples to analyze the factors which determine why firms cooperate in r d we first review the reasons offered by the literature to explain technological cooperation with this allowing us to determine the conceptual framework and to propose some hypotheses we test these hypotheses with a sample of 1652 spanish firms that have carried out r d activities the results obtained suggest that firms motivations for cooperative r d are the complexity of technology and the fact that innovation is costly and uncertain we find that in order to undertake cooperative r d it is necessary to have certain internal capacities in this area with our results being supported by the theory of absorptive capacity however and by contrast with the results presented in other works questions related to market access and search for opportunities do not appear to exert an influence over cooperative r d besides the large sized firms resort more to cooperation and the reasons for cooperative r d differ as between large and small sized firms

crowdsourcing city government using tournaments to improve inspection accuracy can open tournaments improve the quality of city services the proliferation of big data makes it possible to use predictive analytics to better target services like hygiene inspections but city governments rarely have the in house talent needed for developing prediction algorithms cities could hire consultants but a cheaper alternative is to crowdsource competence by making data public and offering a reward for the best algorithm this paper provides a simple model suggesting that open tournaments dominate consulting contracts when cities have a reasonable tolerance for risk and when there is enough labor with low opportunity costs of time we also illustrate how tournaments can be successful by reporting on a boston based restaurant hygiene prediction tournament that we helped coordinate the boston tournament yielded algorithms at low cost that proved reasonably accurate when tested out of sample on hygiene inspections occurring after the algorithms were submitted we draw upon our experience in working with boston to provide practical suggestions for governments and other organizations seeking to run prediction tournaments in the future

all pay auctions with affiliated binary signals abstract we analyze all pay auctions with affiliated values and binary signals we analyze the unique symmetric equilibrium with any number of bidders and show that the bidders earn positive rents only if the equilibrium is monotone we also characterize the symmetric equilibrium of the closely related two player war of attrition we compare expected revenues across these formats all pay auctions result in lower expected rents to the bidders than standard auctions but they also induce inefficient allocations in some models with affiliated private values with two bidders the effect on rent extraction dominates and the all pay auctions outperform standard auctions in terms of expected revenue with many bidders standard auctions may result in higher expected revenue the war of attrition outperforms the standard auctions in terms of revenue but its ranking relative to all pay auctions is ambiguous

what drives the choice of the type of partner in r d cooperation evidence for spanish manufactures and services abstractwe analyse the heterogeneity in firms decisions to engage in r d cooperation taking into account the type of partner competitors suppliers or customers and research institutions and the sector to which the firm belongs manufactures or services we use information from the technological innovation panel pitec for spanish firms and estimate multivariate probit models corrected for endogeneity which explicitly consider the interrelations between the different r d cooperation strategies we find that placing a higher importance to publicly available information incoming spillovers receiving public funding and firm size increase the probability of cooperation with all kind of partners but the role is much stronger in the case of cooperative agreements with research institutions and universities our results also suggest that r d intensity and the importance attributed to the lack of qualified personnel as a factor hampering innovation are key factors influencing positively r d cooperation

on the existence of pure and mixed strategy nash equilibria in discontinuous games a game is better reply secure if for every nonequilibrium strategy x and every payoff vector limit u resulting from strategies approaching x some player i has a strategy yielding a payoff strictly above u i even if the others deviate slightly from x if strategy spaces are compact and convex payoffs are quasiconcave in the owner s strategy and the game is better reply secure then a pure strategy nash equilibrium exists better reply security holds in many economic games it also permits new results on the existence of symmetric and mixed strategy nash equilibria

contests with three or more heterogeneous agents abstract we study monotone equilibrium behavior in contests with observable effort bid where three or more participants have distinct risk attitudes and the monetary value for the prize of each is drawn independently from a distinct distribution these differences can either cause a player to drop out that is always choose zero effort regardless of his valuation or use all or nothing strategies with discontinuous effort choice neither complete drop out nor discontinuous bidding with finitely many gaps is consistent with pure strategy monotone bayesian nash equilibrium in a contest with either ex ante identical players or only two distinct participants

recognition for sale abstract i examine the consequences of letting players compete for bargaining power in a multilateral bargaining game in each period the right to propose an offer is sold to the highest bidder and all players pay their bids if players vote according to any rule in which no player has veto power then the first proposer captures the entire surplus if a full consensus is needed for an offer to be accepted then the first proposer shares the surplus with at most one other player and as the period length between offers vanishes one player may capture virtually the entire surplus in settings with a stochastic or an endogenous surplus players are unwilling to efficiently delay agreement or invest in the surplus

competitive policy development we present a model of policy development in which competing factions have different ideologies yet agree on certain common objectives policy developers can appeal to a decision maker by making productive investments to improve the quality of their proposals these investments are specific to a given proposal which means that policy developers can potentially obtain informal agenda power competition undermines this agenda power forcing policy developers to craft policies that are better for the decision maker this beneficial effect is strongest if policy developers have divergent ideological preferences because their intense desire to affect policy motivates them to develop higher quality proposals jel d72 d73 d78 e61 during the early years of the new deal president franklin delano roosevelt faced an enormous challenge he believed that dramatic policy innovation was urgently needed on a wide range of issues including agriculture trade banking employment and social insurance however although roosevelt was well versed in policy crafting workable proposals for such a far reaching agenda was well beyond his capacity or that of his immediate advisors instead the president had to rely on a broader array of politicians and bureaucrats to develop new policies although these individuals shared some common goals e g ending the great depression they also had deep seated ideological disagreements among themselves and with the president about what policies the federal government should pursue classic and contemporary theories of bureaucratic politics would suggest that this situation was ripe for exploitation and inefficiency weber 1991 famously argued that the typical ruler of a modern state is reduced to being a mere dilettante when dealing with institutionalized bureaucratic actors more recently scholars

to deter or to moderate alliance formation in contests with incomplete information we consider two players choice about the formation of an alliance ahead of conflict in a framework with incomplete information about the strength of the potential ally when deciding on alliance formation players anticipate the self selection of other players and the informational value of own and other players choices in the absence of these signaling effects strong players have an incentive to stand alone which leads to a separating equilibrium this separating equilibrium can be destabilized by deception incentives if beliefs are updated on the basis of endogenous alliance formation choices weak players may find it attractive to appear strong in order to deter competitors from positive effort choices strong players may find it attractive to appear weak in order to give their competitors a false sense of security and then beat them with little effort moreover appearing weak allows players to free ride when alliances are formed jel d72 d74

all pay auctions with certain and uncertain prizes abstract we study all pay auctions with multiple prizes the players have the same value for all the certain prizes except for one uncertain prize for which each player has a private value we characterize the equilibrium strategy and show that independent of the ranking of the uncertain prize if the uncertain prize is not the lowest one a player s effort as well as his expected payoff increase in his value for the uncertain prize otherwise if this prize is the lowest one we obtain that a player s effort may decrease in his value for the uncertain prize but his expected utility increases

debt and creative destruction why could subsidizing corporate debt be optimal the existing theoretical literature provides little justification for a corporate debt subsidy we illustrate the welfare benefit of this subsidy and study how the social costs and benefits change with the duration of industry distress in our model two firms engage in socially wasteful competition for survival in a declining industry firms differ on two dimensions exogenous productivity and endogenously chosen amount of debt financing resulting in a two dimensional war of attrition debt financing increases incentives to exit which although costly for the firm is socially beneficial these benefits decline as industry distress shortens our normative model sheds light on why the debt tax subsidy still persists around the world analogously the model can also rationalize a seemingly ad hoc feature of the u s tax system which subsidizes the conflict of interest between debt and equity regarding firm liquidation this paper was accepted by amit seru finance

handicaps in incomplete information all pay auctions with a diverse set of bidders abstract in many contests a subset of contestants is granted preferential treatment which is presumably intended to be advantageous examples include affirmative action and biased procurement policies in this paper however i show that some of the supposed beneficiaries may in fact become worse off when the favored group is diverse the reason is that the other favored contestants become more aggressive which may outweigh the advantage that is gained over contestants who are handicapped the contest is modeled as an incomplete information all pay auction in which contestants have heterogenous and possibly non linear cost functions

arms races and conflict experimental evidence we study escalation and aggression in an experimental first strike game in which two participants play multiple rounds of a money earning task in each round both players can spend money to accumulate weapons the player with more weapons can spend money to strike against the other player which almost totally eliminates the victim s earnings potential and removes their capacity to strike weapons can serve as a means of deterrence in four treatments we find that deterrence is strengthened if weapon stocking cannot be observed that a balance of power is effective in maintaining peace and that mutually beneficial trade decreases the risk of confrontation but not necessarily the likelihood of costly arms races