the solution to the tullock rent seeking game when r 2 mixed strategy equilibria and mean dissipation rates 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

tournaments with midterm reviews in many tournaments investments are made over time the question whether to conduct a review once at the end or additionally at points midway through the tournament is a strategic decision if the latter course is chosen then the designer must establish both a rule for aggregating the results of the different reviews and a rule for determining compensations we first study the case of a fixed exogenously given prize and then extend the analysis to the case where the prize is not fixed but may vary with the tournament s outcome it is shown that 1 it is always optimal to assign a higher weight to the final review 2 this weight increases with the dominance of the first stage effort in determining the final review s outcome when the prize is not fixed the optimal design generates an asymmetric tournament in the second stage that favors the winner of the midterm review

keep on fighting the dynamics of head starts in all pay auctions abstract we investigate a model of a series of contests in which a contestant s past and present success gives a head start over a rival in the future how this advantage from winning affects contestants efforts whether the laggard gives up or keeps on fighting and how the head start develops over time are key issues we find that the expected effort of the laggard will always be higher than the rival at some stage in the series of contests and this is most likely to happen when at a large disadvantage or at a late stage in the series

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

laboratory evidence on the effectiveness of corporate leniency programs the number of cartels detected in the united states and in europe has increased considerably since the introduction of corporate leniency programs in antitrust legislation it cannot however be ruled out that this apparent success results in part from increased cartel activity we explore the effects of corporate leniency programs on pricing and cartel activity by use of an experiment we find that in the lab i fewer cartels are established when a leniency program is in place and ii cartels that do exist are less successful in charging prices above the static nash equilibrium price and have lower survival rates

on the salience of ethnic conflict ray acknowledges support from the national science foundation under grants 0421852 and 0617827 esteban is a member of barcelona economics xrea and is grateful for support from the generalitat de catalunya and the cicyt sej 2006 00369 this research is part of the polarization and conflict research project cit2 ct 2004 506084 funded by the european commission dg research sixth framework program

rethinking ecosystem services to better address and navigate cultural values ecosystem service approaches have become a prominent basis for planning and management cultural services and non use values are included in all major typologies and present some of the most compelling reasons for conserving ecosystems though many barriers exist to their explicit characterization the values that conform least well to economic assumptions variously lumped together with as cultural services have proven elusive in part because valuation is complicated by the properties of intangibility and incommensurability which has in turn led to their exclusion from economic valuation we argue that the effectiveness of the ecosystem services framework in decision making is thwarted by i conflation of services values and benefits and ii failure to appropriately treat diverse kinds of values we address this challenge by 1 distinguishing eight dimensions of values which have implications for appropriate valuation and decision making 2 demonstrating the interconnected nature of benefits and services and so the ubiquity of intangible values 3 discussing the implications of these propositions for ecosystem services research and 4 outlining briefly a research agenda to enable decision making that is ecologically appropriate and socially just because many ecosystem services co produce cultural benefits full characterization of services must address non material values through methods from diverse social sciences

strategic competition in sequential election contests this paper studies a sequential election contest such as theamerican presidential primary in which several electionsoccur one at a time until a single winner emerges theconventional wisdom is such a system benefits a candidatefavored in the initial elections because of momentum thispaper uncovers a potentially opposing force if participationis costly and candidates exit when they have unfavorablefuture prospects a candidate with friendly elections at theend of the contest will typically benefit from the resultinggame theoretic competition tension between this strategic effect and momentum helpsexplain several empirical regularities of presidentialprimaries

election goals and the allocation of campaign resources this paper compares the equilibrium behavior and outcomes in a model of two party competition for legislative seats under two different assumptions about the parties goals 1 parties maximize the expected number of seats won and 2 parties maximize the probability of winning a majority of the seats the two goals may lead to qualitatively different behavior and studying the differences yields insights into the relationship between the goals and the role of assymetries between the parties

sent seeking with private values we study a rent seeking contest in which the players valuations of the prize are private information we determinea bayesian equilibrium and give conditions under which theequilibrium exists although players are ex ante symmetric increased possibilities for ex post lopsidedness lead toless aggressive bidding lopsidedness increases as players values become less positively correlated or as the variationin possible values increases we also compare theprivate information contest to a related public informationcontest in which the realizations of values are commonknowledge the contests are equally efficient and players areindifferent between the two but risk averse sellers of theprize are not

fines leniency and rewards in antitrust this article reports results from an experiment studying how fines leniency and rewards for whistleblowers affect cartel formation and prices antitrust without leniency reduces cartel formation but increases cartel prices subjects use costly fines as punishments leniency improves antitrust by strengthening deterrence but stabilizes surviving cartels subjects appear to anticipate the lower postconviction prices after reports leniency with rewards prices fall at the competitive level overall our results suggest a strong cartel deterrence potential for well run leniency and reward schemes these findings may also be relevant for similar white collar organized crimes such as corruption and fraud

unique equilibrium in rent seeking contests with a continuum of types it is shown that rent seeking contests with continuous and independent type distributions possess a unique pure strategy nash equilibrium

how to split the pie optimal rewards in dynamic multi battle competitions abstract multi battle competitions are ubiquitous in real life in this paper we examine the effort maximizing reward design in sequentially played multi battle competitions between two players the organizer has a fixed prize budget and rewards players contingent on the number of battles they win in a three battle contest a full spectrum of contest technologies in the tullock family is accommodated we find that the optimal design varies with the discriminatory power of the contest technology in particular when it is in the low range winner take all is optimal for the intermediate range as discriminatory power increases the optimal prize structure evolves continuously from winner take all to the proportional division rule due to the need to mitigate the growing momentum discouragement effect for the high range a wide span of prize structures extracts full surplus and is thus optimal several robustness checks confirm that mitigating the momentum discouragement effect is essential for effort maximizing prize design in dynamic multi battle contests

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

asymmetric all pay auctions with incomplete information the two player case abstract we prove existence and uniqueness of bayesian equilibrium for a class of generally asymmetric all pay auctions with incomplete information due to its importance in applications some prominence is given to the first price all pay auction for which a detailed characterization of equilibrium and an approximation to equilibrium of its well studied complete information version are supplied furthermore we relate our uniqueness result to the well known multiplicity of equilibria in the war of attrition second price all pay auction which emerges as a limit point of the class of two player auction games considered journalof economic literature classification numbers d44 c62 c72

the alliance formation puzzle and capacity constraints the formation of an alliance in conflict situations is known to suffer from a collective action problem and from the potential of internal conflict we show that budget constraints of an intermediate size can overcome this strong disadvantage and explain the formation of alliances

racing with uncertainty and strategic interaction between competitors as the race unfolds most of the existing literature examines one or other of these features but not the two combined our aim is to see how the efforts of competitors in a race vary with the intensity of rivalry between them in our principal model whch is of a one dimensional race it is shown that the leader in the race makes greater efforts than the follower and efforts increase as the gap between competitors decreases under certain conditions the same results hold in our second related model which is of a two dimensional race

primaries and the new hampshire effect candidates for u s presidential elections are determined through sequential elections in single states the primaries we develop a model in which candidates can influence their winning probability in electoral districts by spending money on campaigning the equilibrium replicates several stylized facts very well campaigning is very intensive in the first district the outcome of the first election then creates an asymmetry in the candidates incentives to campaign in the next district which endogenously increases the equilibrium probability that the first winner wins in further districts on the normative side our model oers a possible explanation for the sequential organization it leads in expectation to a lower level of advertising expenditures than simultaneous elections moreover if one of the candidates is the more eective campaigner sequential elections also perform better with regard to the selection of the best candidate

modeling the birth and death of cartels with an application to evaluating competition policy one of the primary challenges to measuring the impact of antitrust policy on collusion is that the cartel population is unobservable we observe only the population of discovered cartels to address this challenge a model of cartel creation and dissolution is developed to endogenously derive the populations of cartels and discovered cartels it is then shown how one can infer the impact of antitrust policy on the population of cartels by measuring its impact on the population of discovered cartels in particular the change in the distribution on the duration of discovered cartels could be informative in assessing whether a new antitrust policy is reducing the latent rate of cartels

the effects of market organization on conspiracies in restraint of trade abstract mindful of the market structure conduct performance paradigm fundamental to industrial organization research this paper uses laboratory experimental techniques to study the impact of conspiratorial opportunities on market performance we compare posted offer markets where sellers but not buyers are all conspiratorial opportunities with observations from three control groups 1 posted offer markets without conspiratorial opportunities 2 double auction markets with conspiratorial opportunities and 3 posted offer markets with true single seller monopolists the basic conclusions generated by our experimental design are 1 seller conspiracies in posted offer markets tend to raise prices but not profits relative to similarly organized markets without conspiracies 2 posted offer conspiracies tend to generate higher prices but not profits than double auction conspiracies and 3 posted offer monopolies tend to generate higher profits but not prices then posted offer conspiracies

uniqueness of equilibrium in two player asymmetric tullock contests with intermediate discriminatory power abstract this paper provides a different approach to establish the uniqueness of equilibrium in tullock contests between two players with asymmetric valuations when the discriminatory power r is between 1 and 2 our result complements that of ewerhart 2017 in filling up the remaining gap in the literature on the uniqueness of equilibrium in two player asymmetric tullock contests

do meetings in smoke filled rooms facilitate collusion the sherman act prohibits firms from discussing prices in meetings traditional thought suggests that this prohibition makes it harder for firms to collude and economists have concluded that the sherman act operates in the public interest i provide an alternative explanation for the act that also accounts for the small sanctions chosen by the legislature when firms interact in a dynamic environment in which the law helps them to prevent renegotiation the firms may benefit from the law that makes it costly but not very costly to meet to discuss prices the sherman act may help firms to collude

endogenous communication and tacit coordination in market entry games an explorative experimental study this paper explores experimentally the effects of costly communication possibilities in market entry games it is shown that these effects depend on whether entry costs are symmetric or asymmetric in the former but not the latter case communication possibilities increase coordination success substantially and are likely to generate inferior outcomes for consumers furthermore cost asymmetries provide a tacit coordination cue that is robust to changes in the game and is used by experienced players as a substitute to communication it is also shown that although communication opens up for aggressive market domination strategies such strategies are not used often successful

noncooperative foundations of bargaining power in committees and the shapley shubik index abstract in this paper we explore the noncooperative foundations of the bargaining power that a voting rule gives to each member of a committee that bargains in search of consensus over a set of feasible agreements under a voting rule assuming complete information we model a variety of bargaining protocols and investigate their stationary subgame perfect equilibria we show how the shapley shubik index and other power indices can be interpreted as measures of bargaining power that appear in this light as limit cases

interim performance feedback in multistage tournaments the optimality of partial disclosure workers competing in a tournament for a prize e g a promotion often perform sequentially in multiple stages when the firm is privately informed about the workers performance it can sharpen incentives by strategically disclosing the intermediate results but the policies that enhance final stage effort may dampen incentives at the intermediate stage in our model the optimal disclosure policy has a simple form disclose only if all workers perform poorly this result offers a novel justification for partial disclosure in performance feedback also it contrasts with the existing literature that focuses on the extreme policies of full disclosure and no disclosure

a model of a team contest with an application to incentives under list proportional representation abstract we develop a model of a team contest for multiple indivisible prizes team members exert costly effort to improve their team s success we analyze two intrateam allocation rules under a list rule prizes are allocated according to a predetermined list under an egalitarian rule prizes are allocated according to a fair lottery we show that which allocation rule maximizes team success depends on the degree of complementarity between members efforts and the convexity of the individual cost of effort function we then apply the model to the context of elections under proportional representation with both open and closed lists we derive conditions under which closed lists generate stronger incentives than open lists our results offer a rationale for the lack of evidence on the negative incentive effects of closed lists

benchmarking the sustainability performance of the brazilian non gm and gm soybean meal chains an indicator based approach abstract a commonly accepted approach for measuring the sustainability of agricultural products is the first step toward treating traded products differentially according to their sustainability if we were able to measure sustainability business stakeholders could optimize food production chains consumers could demand products based on reduced environmental and social impacts and policy makers could intervene to meet the growing demand for food in a context of environmental conservation population growth and globalization we proposed to measure profit adjusted for the negative externalities of production as a promising single metric for benchmarking products in terms of their relative sustainability the adjusted profit differences between different products are then assessed by means of the bennet total factor productivity tfp indicator and the total price recovery tpr indicator to highlight areas for potential sustainability improvement to illustrate the usefulness of the indicator based approach we assessed the relative sustainability of two brazilian conventional soybean meal chains non genetically modified non gm and genetically modified gm chains based on the results we indicated potential areas for sustainability improvement sustainability issues included in the assessment were profitability global warming potential eutrophication potential environmental toxicity farmworker toxicity consumer toxicity deforestation and loss of employment results showed that the non gm soybean meal chain is more sustainable than the gm chain higher adjusted profit due to higher tfp and favorable prices especially for outputs however both chains require joint efforts to address their economic environmental and social deficiencies these efforts should focus on providing technical and high quality assistance to reduce biocide use and improving transportation the analysis in this study could be extended by undertaking a comparative assessment of the sustainability performance of major soybean meal producers i e united states argentina china and brazil the approach proved to be a promising benchmarking tool for agricultural trade flows it allows an integrated assessment of the dimensions of sustainability along food chains that is sufficiently flexible to compare the sustainability level of various biomass stocks that are produced in different locations and in a variety of environmental and socio economic contexts nevertheless it requires consensus on which components of sustainability are to be assessed

sense and sustainability sustainability as an objective in international agricultural research abstract this paper first discusses how to use sustainability as a criterion by which to evaluate agricultural research then illustrates the difficulties inherent in applying the criterion and finally draws implications for international agricultural research seven propositions relating to sustainability are stated agricultural researchers are urged to a recognize the importance of the sustainability of agricultural systems b devise appropriate ways to measure sustainability c empirically examine the sustainability of some well defined cropping or farming systems d define the externalities that exist in such systems and e develop methods to measure those externalities

endogenous cartel formation experimental evidence in a bertrand oligopoly experiment firms choose whether or not to engage in cartel like communication and if so they may get fined by a cartel authority we find that the four firm industries form cartels more often than the duopolies because they gain less from a hysteresis effect after cartel disruption

team contests with multiple pairwise battles abstract we consider a multi battle team contest in which players from two rival teams form pairwise matches to fight in distinct component battles which are carried out sequentially or partially

collective rent dissipation the theory of rent seeking was initiated by tullock 1967 1980 followed by krueger 1974 and posner 1975 and more recently extended in various directions by allard 1988 appelbaum and katz 1986a b c gradstein and nitzan 1989 hillman and katz 1984 1987 hillman and samet 1987 hillman and riley 1989 katz et al 1990 long and vousden 1987 ursprung 1990 and varian 1989 the purpose of this paper is to extend this theory by introducing the possibility of collective group rent seeking with voluntary individual decisions regarding their extent of participation in the collective rent seeking efforts

do antitrust laws facilitate collusion experimental evidence on costly communication in duopolies bertrand supergames with non binding communication are used to study price formation and stability of collusive agreements on experimental duopoly markets the experimental design consists of three treatments with different costs of communication zero cost low cost and high cost prices are found to be significantly higher when communication is costly moreover costly communication decreases the number of messages but more importantly it enhances the stability of collusive agreements mccutcheon 1997 presents an interesting application to antitrust policy by letting the cost of communication symbolize the presence of an antitrust law that prohibits firms from discussing prices although our experimental results do not support the mechanism of mccutcheon s 1997 argument the findings point in the direction of her prediction that antitrust laws might work in the interest of firms

foreign direct investment in vertically related markets we study an mne s choice of fdi mode in a vertically related market with local input sourcing we show how the market s vertical structure and trading features affect this choice an mne s incentives to expand through cross border acquisition rather than through greenfield investment are stronger in markets with higher upstream bargaining power upstream concentration and unobservable contract terms the opposite holds in markets in which wholesale price contracts instead of two part tariffs are used our welfare analysis suggests that the host country should not always welcome fdi and should discourage fdi through acquisition investissements exterieurs directs sur les marches verticaux dans cet article nous etudions le choix d une entreprise multinationale de proceder a un investissement exterieur direct dans un marche vertical avec sources d approvisionnement locales nous montrons la facon dont la structure verticale et les caracteristiques commerciales du marche ont une incidence sur une telle decision les mesures incitatives offertes aux entreprises multinationales pour se developper par l entremise d acquisitions transfrontalieres plutot que par l investissement dans de nouvelles installations sont plus fortes sur les marches dotes d un pouvoir de negociation et d une concentration en amont plus eleves ainsi que par des conditions contractuelles non observables l inverse s observe sur les marches ou les contrats a prix de gros sont utilises en lieu et place des tarifs binomes en termes de bien etre notre analyse suggere que le pays hote ne devrait pas toujours accueillir les investissements exterieurs directs et devrait decourager ces memes investissements realises par l entremise d acquisitions

on equilibrium player ordering in dynamic team contests we study equilibrium player ordering in a dynamic all pay contest between two teams the contest lasts two periods and each team consists of two players who perform in different periods on behalf of their teams the team with the higher aggregate output wins the prize which is a public good to its players each team has one stronger player and one weaker player and the two teams can differ in their values of the prize the teams maximize their winning odds by strategically assigning their players to different periods we find that when the intrateam heterogeneity in player ability is not excessive the teams would allocate their stronger players to the late positions as the anchormen when both the intrateam ability gap and interteam heterogeneity in teams values become excessively large the team with high value always places its stronger player in the early position who will place a large bid to preempt late competition jel c7 d7 d8

naked exclusion an experimental study of contracts with externalities this paper reports the results of an experiment designed to assess the ability of an incumbent seller to profitably foreclose a market with exclusive contracts we use the strategic environment described by rasmusen ramseyer and wiley 1991 and segal and whinston 2000 where entry is unprofitable when sufficiently many downstream buyers sign exclusive contracts with the incumbent when discrimination is impossible the game resembles a stag hunt coordination game in which the buyers payoffs are endogenously chosen by the incumbent seller exclusion occurs when the buyers fail to coordinate on their preferred equilibrium two way non binding pre play communication among the buyers lowers the power of exclusive contracts and induces more generous contract terms from the seller when discrimination and communication are possible the exclusion rate rises divide and conquer strategies are observed more frequently when buyers can communicate with each other exclusion rates are significantly higher when the buyers payoffs are endogenously chosen rather than exogenously given finally secret offers are shown to decrease the incumbent s power to profitably exclude

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

equilibrium selection in sequential games with imperfect information abstract games with imperfect information often feature multiple equilibria which depend on beliefs off the equilibrium path standard selection criteria such as passive symmetric or wary beliefs rest on ad hoc restrictions on beliefs we propose a new selection criterion that imposes no restrictions on beliefs we select the action profile that is supported in equilibrium by the largest set of beliefs we conduct an experiment to compare the predictive power of the existing and our novel selection criteria in an application on vertical multi lateral contracting we find that our criterion outperforms the other selection criteria

measuring lying aversion abstract we introduce a new method for measuring the decision to lie in experiments in the game the decision to lie increases own payment independent of the counterpart s decision but potentially at a cost for the counterpart we identify at the individual level the decision to lie and measure how individuals react to different incentives to lie furthermore we investigate how lying behavior changes over time our method allows us to classify people into types including those who never lie those who always lie and those who react to incentives to lie we suggest this method as a useful instrument for examining factors that influence the decision to lie

bilateral monopolies and incentives for merger the paper presents a model of duopoly in which firms acquire inputs through bilateral monopoly relations with suppliers it combines a bargaining model with a duopoly model to examine how input pri

antitrust and prices this study examines the effects of antitrust prosecution on prices charged by firms indicted for price fixing in a survey of 25 cases filed between 1973 and 1984 prices are found to gradually rise by about 7 percent over the 4 years following an indictment however the severity of penalties is negatively correlated with prices these two findings suggest either that penalties are too lenient or that prosecution is too broad penalizing economically efficient conspiracies along with those that are inefficient

multi battle contests abstract we study equilibrium in a multistage race in which players compete in a sequence of simultaneous move component contests players may win a prize for winning each component contest as well as a prize for winning the overall race each component contest is an all pay auction with complete information we characterize the unique subgame perfect equilibrium analytically and demonstrate that it exhibits endogenous uncertainty even a large lead by one player does not fully discourage the other player and each feasible state is reached with positive probability in equilibrium pervasiveness expected effort in the component contests may be non monotonic in the closeness of the race and realized individual effort may exceed the value of the prize by a factor that is proportional to the maximum number of stage victories required

historical property rights sociality and the emergence of impersonal exchange in long distance trade this laboratory experiment explores the extent to which impersonal exchange emerges from personal exchange with opportunities for long distance trade we design a three commodity production and exchange economy in which agents in three geographically separated villages must develop multilateral exchange networks to import a good only available abroad for treatments we induce two distinct institutional histories to investigate how past experience with prop erty rights affects the evolution of specialization and exchange we find that a history of unenforced property rights hinders our subjects ability to develop the requisite personal social arrangements to support specialization and effec tively exploit impersonal long distance trade jel c90 d23 d5 p 4

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

strategic leniency and cartel enforcement the cornerstone of cartel enforcement in the united states and elsewhere is a commitment to the lenient prosecution of early confessors a burgeoning game theoretical literature is ambiguous regarding the impacts of leniency i develop a theoretical model of cartel behavior that provides empirical predictions and moment conditions and apply the model to the complete set of indictments and information reports issued over a 20 year span statistical tests are consistent with the notion that leniency enhances deterrence and detection capabilities the results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime jel d43 l12 l13 k21 in 1993 the department of justice doj introduced a new leniency program with the intent of destabilizing existing cartels and deterring new cartels the program commits the doj to the lenient prosecution of early confessors in particular it guarantees complete amnesty from federal prosecution to the first confessor from each cartel provided that an investigation into the confes sor s cartel is not already underway it also offers discretionary penalty reductions to conspirators who confess when an investigation is already ongoing the new leniency program has become the cornerstone of cartel enforcement efforts in the united states e g scott d hammond 2004 and recently has inspired antitrust authorities in australia canada the european union japan south korea and elsewhere to introduce similar programs oecd 2002 2003 this paper tests the efficacy of the new leniency program the results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime a burgeoning game theoretical literature is ambiguous regarding the impacts of leniency a common finding is that leniency may destabilize cartels because conspirators can simultane

the dynamics of majoritarian blotto games abstract we study colonel blotto games with sequential battles and a majoritarian objective for a large class of contest success functions the equilibrium is unique and characterized by an even split each battle that is reached before one of the players wins a majority of battles is allocated the same amount of resources from the player s overall budget as a consequence a player s chance of winning any particular battle is independent of the battlefield and of the number of victories and losses the player has accumulated in prior battles this result is in stark contrast to equilibrium behavior in sequential contests that do not involve either fixed budgets or a majoritarian objective we also consider the equilibrium choice of an overall budget for many contest success functions if the sequence of battles is long enough the payoff structure in this extended game resembles an all pay auction without noise

publicly funded uk agricultural r d and social total factor productivity most studies concerned with measuring the rate of return to publicly funded agricultural r d investment have found high returns suggesting under investment and calls for increased expenditure have been common however the evaluation of returns tends to measure the effect of research expenditure against growth in total factor productivity tfp based on market inputs and outputs when compared against growing public unease over the environmental effects of pursuing agricultural productivity growth tfp indices become a misleading measure of growth this paper integrates some non market components into the tfp index the costs of two specific externalities of agricultural production namely fertiliser and pesticide pollution are integrated in a tfp index constructed for the period 1948 1995 this adjusted or social tfp index is measured against uk public r d expenditures the rates of return to agricultural r d are reduced by using the social as opposed to the traditional tfp index whilst both remain at justifiable levels previous studies appear to have over estimated the effect of agricultural r d expenditures furthermore with changes in policy towards more socially acceptable but non productivity enhancing outcomes such as animal welfare rural diversification and organic farming the future framework for analysing returns to agricultural r d should not be so dependent on productivity growth as an indicator of research effectiveness

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

on the formation of alliances in conflict and contests this paper examines the problem of the formation of alliances in conflict and more generally in contests with three players each player possesses an exogenous strategic endowment e g arms efforts rent seeking activity the outcome of contests including those between any alliances of players is governed by a contest success function csf in the three person one cake problem an alliance between two players against the third one will form if and only if the csf has an increasing returns characteristic when an alliance forms there is a tendency to be formed by the weaker players against the strongest player similar tendencies exist in other three person problems that i examine

war and conflict in economics theories applications and recent trends we review the main economic models of war and conflict these models vary in details but their implications are qualitatively consistent highlighting key commonalities across a variety of conflict settings recent empirical literature employing both laboratory and field data in many cases confirms the basic implications of conflict theory however this literature also presents important challenges to the way economists traditionally model conflict we finish our review by suggesting ways to address these challenges

discouragement effect and intermediate prizes in multi stage contests evidence from davis cup abstract the discouragement effect of being the lagging player in multi stage contests is a well documented phenomenon in this study we utilize data from 2447 davis cup matches in team tennis tournaments to test the effect of being behind or ahead on individuals performance with and without intermediate prizes using several different strategies to disentangle the effect of being ahead in the interim score from the effect of selection we find the usual discouragement effect however the discouragement effect disappears after the introduction of intermediate prizes in the form of ranking points the lagging favorite had close to a 20 percentage point greater probability of winning compared to matches without such a prize we show that this result is not driven by the selection of better players into tournaments with intermediate prizes as predicted by previous theoretical studies our empirical findings suggest that intermediate prizes may mitigate or even eliminate the ahead behind effects that arise in multi stage contests

upstream capacity constraint and the preservation of monopoly power in private bilateral contracting this article presents a model of private vertical contracting with a capacity constrained monopolistic supplier i consider full capacity beliefs that are consistent with an upstream capacity constraint and are wary when the constraint is tight or production is costless i show that facing a capacity constraint the supplier may preserve its monopoly power in equilibrium this result stands in sharp contrast to the standard result that the supplier cannot preserve its monopoly power which holds under the usual implicit assumption of an infinite production capacity

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

the impact of leniency and whistle blowing programs on cartels antitrust authorities have set up leniency programs for cartel members that denounce their collusive agreements these programs help prosecute participants and can thereby deter collusion we compare the impact of reduced fines and positive rewards and argue that rewarding individuals including firm employees can deter collusion in a more effective way we discuss possible adverse effects of whistle blowing programs on firms behavior and particularly on turnover incentives to innovate and cooperation we also explore explanations for the puzzling fact that managers keep incriminating evidence and argue reward programs actually provide additional incentives for keeping such evidence

buyer power from joint listing decision we consider a model of vertically related markets in which an upstream firm faces a competitive fringe of less efficient suppliers and negotiates with customers that compete in a downstream market we allow downstream firms to form a buyer group which selects suppliers on behalf of its members we show that transforming individual listing decisions into a joint listing decision makes delisting less harmful for a group member which in turn enhances the group members bargaining position at the expense of the upstream firm we also discuss the implication for upstream investment incentives

communication in vertical markets experimental evidence abstract an upstream monopolist supplying competing downstream firms may fail to monopolize the market because it is unable to commit not to behave opportunistically we build on previous experimental studies of this well known commitment problem by introducing communication allowing the upstream firm to chat privately with each downstream firm reduces total offered quantity from near the cournot level observed in the absence of communication halfway toward the monopoly level allowing all firms to chat together openly results in complete monopolization downstream firms obtain such a bargaining advantage from open communication that all of the gains from monopolizing the market accrue to them a simple structural model of nash in nash bargaining fits the pattern of shifting surpluses well using third party coders unsupervised text mining among other approaches we uncover features of the rich chat data that are correlated with market outcomes we conclude with a discussion of the antitrust implications of open communication in vertical markets

preemption contests between groups we consider a preemption game between competing groups firms lobbying individually for their groups interests provide an empirical example among symmetric groups the first firm to take action bears an unobserved cost and wins the prize on behalf of its group in equilibrium the firm with the lowest cost takes action but with delay more competition and a smaller ratio of costs to benefits reduce delay firms in larger groups wait longer but group action can occur earlier as the probability of a low cost firm is higher asymmetries in group size or strength of externalities also matter

contests with stochastic abilities we consider the properties of perfectly discriminating contests in which players abilities are stochastic but become common knowledge before efforts are expended players whose expected ability is lower than that of their rivals may still earn a positive expected payoff from participating in the contest which may explain why they participate we also show that an increase in the dispersion of a player s own ability generally benefits this player it may benefit or harm his rival but cannot benefit the rival more than it benefits himself we also explore the role of stochastic ability for sequential contests with the same opponent multibattle contests and with varying opponents elimination tournaments and show that it reduces the strong discouragement effects and holdup problems that may otherwise emerge in such games high own ability dispersion selects such players into the contest and favors them in elimination contests jel d72 d74 i introduction manytournamentsarecharacterizedbymultiple rounds with or without the elimination of some candidates in earlier stages of the process of determining a final winner in the political context electionprocessesthatdetermineparty leadersorpoliticalleadersmoregenerallyconsist ofmultipleconteststages intheracefortheu s presidency severalcompetitionstagesgradually narrowdownthenumberofcompetitors 1 inter

collective contests for commons and club goods abstract this paper focuses on collective contests for commons and club goods our main objective is to examine in this context the effect of group size on its performance the main results specify conditions for the existence non existence of the group size paradox namely the situation where a larger group is less more effective in pursuing its interest because of despite the combined effect of the incentives that result in the free riding problem and the tragedy of the commons the paper also explains under what circumstances there exists a bias towards excessive or inadequate winning group size finally it examines the effect of restricted excludability of the commons good within the winning group on the relationship between group size and its winning probability

price leadership and unequal market sharing collusion in experimental markets abstract we consider experimental markets of repeated homogeneous price setting duopolies we investigate the effect on collusion of sequential versus simultaneous price setting we also examine the effect on collusion of changes in the size of each subject s market share in case both subjects set the same price our results show that sequential price setting compared with simultaneous price setting facilitates collusion if subjects have equal market shares or if the follower has the larger market share with sequential price setting we find more collusion if subjects have equal market shares rather than unequal market shares we observe more collusion if the follower has the larger market share than if the follower has the smaller market share

nash in nash bargaining a microfoundation for applied work a nash equilibrium in nash bargains has become the workhorse bargaining model in applied analyses of bilateral oligopoly this paper proposes a non cooperative foundation for nash in nash bargaining that extends the rubinstein 1982 model to multiple upstream and downstream rms assuming there exists gains from trade for each rm pair we prove that there exists an equilibrium with immediate agreement and negotiated prices that correspond to rubinstein prices if and only if the marginal contribution of a set of agreements is weakly greater than the sum of the agreements marginal contributions we provide stronger conditions under which equilibrium prices are unique

vertical integration and collusive incentives an experimental analysis abstract we consider vertically related industries with multiple downstream markets firms make simultaneous output choices in a repeated game upstream duopolists merge with producers in one of the downstream markets that also is a duopoly experimental duopoly markets are constructed to assess the effects of vertical integration upon outputs and profits we find that integration raises outputs in both downstream and upstream markets although only the upstream effect is statistically significant integrated profits are lower and consumer welfare is higher the integrated markets tend to equilibrate more quickly

the evolution of cooperation in infinitely repeated games experimental evidence 1 for example in infinitely repeated prisoner s dilemma games with patient agents both cooperate and defect may be played in equilibrium even though the theory of infinitely repeated games has been used to explain cooperation in a variety of environments no definitive solution has been provided to the problem of equilibrium selection when both cooperation and defection are possible equilibrium outcomes which one should we expect to prevail previous experimental evidence has shown that subjects often fail to coordinate on a specific equilibrium when they play a small number of infinitely repeated games some subjects attempt to establish cooperative agreements while others defect but how would behavior evolve as subjects learn from previous repeated games would cooperation prevail when it can be supported in equilibrium or will subjects learn

an experimental study of exclusive contracts abstract this paper reports results from a laboratory experiment based on exclusive contracts that may theoretically lead to inefficient naked exclusion of a potential rival the data indicate that changes in the number of buyers in the market have no significant effect on exclusion rates but the likelihood of inefficient exclusion is decreased both when a larger fraction of signed buyers are needed to deter a rival s entry and when buyers engage in non binding communication these results have antitrust implications both in terms of helping to identify at risk market characteristics and suggesting potential competition enhancing strategies a sub game of the experiment where buyers make signing decisions can be illustrated as a coordination game with the unique feature that payoffs are affected by a separate but interested party the incumbent seller i find that the height of the potential function and relevant basin of attraction especially when combined with quantal response estimation have larger predictive power in this sub game than several other equilibrium selection criteria

legalizing bribe giving i introduction corruption remains an endemic problem in the developing world and has become a central political issue in many countries empirical work has considerably advanced our understanding of how widespread corruption is and how it can cause harm 1 governments and agencies such as the world bank have sponsored numerous anticorruption programs however regarding how to best fight corruption in practice research has lagged behind policy 2 recently kaushik basu chief economist then of the indian government and now of the world bank proposed a specific approach in basu s 2011 pamphlet why for a class of bribes the act of giving a bribe should be treated as legal he describes a society where bribery is rampant a scourge that deserves to be banished and proposes for the case of harassment bribes that people pay to get services they are legally entitled to 3 the following policy legalize bribe giving double the fine for bribe taking and make the bribe taker pay back the bribe if discovered when a citizen bribes a bureaucrat under traditional law the two become partners in crime they thus lack incentives to report the activity under basu s policy bp which he deems fairly radical incentives are provided for the bribe giver to report the bribe taker if this is foreseen the bureaucrat would not accept the bribe in the first place that is the key idea will it work a hot debate has raged in indian and international press the economist appeared sympathetic 4 however in some quarters the proposal stirred outrage and commentators discarded it mainly on moral grounds 5 more tempered thoughtful criticism has come from economists dreze 2011 in particular wrote a penetrating comment arguing that basu does not give adequate attention to some institutional and moral concerns which may change conclusions basu s intriguing presentation is informal as is the heated debate it inspired perhaps one should not expect the issues to be easily settled through such discourse the proposal is reminiscent of somewhat analogous tools used in other fields such as leniency policies in antitrust and whistleblower protection and reward schemes against fraud and organized crime scholars who studied those measures have suggested they may be effective if well designed and administered but counterproductive if details are not set right 6 deeper understanding of the pros and cons of subtle legal rules may require careful scrutiny within a formal model in section ii we develop a simple formal model to represent the scenarios basu and his commentators care about as explicit games by comparing equilibria we draw conclusions regarding the conditions under which bp is likely to be effective bp gets mixed context dependent grades and we highlight complementarities with other policies the proposal works best if coupled with measures that increase the costs for bureaucrats of denying citizens what they deserve and that reduce the costs for citizens of getting justice verifying whether a bribe was paid entails costs which may deter reporting hence bp works better against larger bribes inefficient or corrupt law enforcement increases these costs so bp will be more effective if it is part of a wider reform package that also fosters independence and accountability of the legal system in section iii we take into account also the legal and moral considerations brought up by dreze revealing other problems related to bp we propose a modified policy mbp that escapes many objections the idea is inspired by leniency rules in antitrust rather than legalize bribe giving only those who report having paid a bribe would be awarded legal immunity extortionary harassment bribes are distortive when they are not paid because a justified and presumably welfare enhancing licence is then not issued with other arguably often more serious forms of corruption distortions occur when bribes are paid not otherwise

bilateral control with vertical contracts when a manufacturer contracts secretly with competing retailers he is subject to opportunism and linear or non linear tariffs may not allow the manufacturer to maintain monopoly prices to analyse the effects of rpm o brien shaffer 1992 use a concept of contract equilibrium which concentrates on pairwise deviations thereby questioning the robustness of the analysis this paper emphasises the distinction between the contract equilibrium and standard non cooperative concepts we advocate for some caution in the use of the former concept as if overlooks an inexistence problem we then confirm the intuition that rpm can help solve the manufacturer s commitment problem this confirms that o brien shaffer s insight is robust and validates the courts reluctance against rpm

what price coordination the efficiency enhancing effect of auctioning the right to play a model is proposed to explain the results of recent experiments in which subjects repeatedly played a coordination game with the right to play auctioned each period in a larger group subjects bid the market clearing price to a level recoverable only in the efficient equilibrium and then converged to that equilibrium although subjects playing the game without auctions converged to inefficient equilibria the efficiency enhancing effect of auctions is reminiscent of forward induction but is not explained by equilibrium refinements the model explains it by showing how strategic uncertainty interacts with history dependent learning dynamics to determine equilibrium selection copyright 1998 by american economic association

asset markets as an equilibrium selection mechanism coordination failure game form auctions and tacit communication abstract in this paper we explore the possibility that asset markets provide a means of tacit communication which may allow subjects to coordinate on the payoff dominant equilibrium in an underlying coordination game we find that the existence of a market price for the right to play does communicate information about the equilibrium selection problem specifically behavior never converged to the efficient outcome when subjects were endowed with the right to participate but always converged to the efficient outcome when subjects purchased the right to participate journal of economic literature classification numbers c720 g120

does auctioning of entry licences induce collusion an experimental study we use experiments to examine whether the auctioning of entry rights affects the behaviour of market entrants standard economic arguments suggest that the licence fee paid at the auction will not affect pricing since it constitutes a sunk cost this argument is not uncontested though and this paper puts it to an experimental test our results indicate that an auction of entry licences has a significant positive effect on average prices in oligopoly but not in monopoly these results are consistent with the conjecture that entry fees induce players to take more risk in pursuit of higher expected profits in oligopoly entry fees increase the probability that the market entrants coordinate on a collusive price path in monopoly taking more risk does not make sense since average prices are already close to the profit maximizing price

quantifying the deterrent effect of anticartel enforcement this paper presents a rare attempt to quantify the deterrent effect of anti cartel policy it develops a conceptual framework which establishes the sort of information necessary for such quantification this is then illustrated and calibrated by drawing upon existing literatures and using evidence from legal cartels to approximate what would be observed absent policy measuring impact by the proportion of all potential harm that is deterred our best estimate is two thirds and even on conservative assumptions at least half of all harms or seven times the detected harm is deterred

naked exclusion in the lab the case of sequential contracting in the context of the naked exclusion model of rasmusen ramseyer and wiley 1991 and segal and whinston 2000b we examine whether sequential contracting is more conducive to exclusion in the lab and whether it leads to lower exclusion costs for the incumbent than simultaneous contracting we find that an incumbent who proposes exclusive contracts to buyers sequentially is better able to deter entry than an incumbent who proposes contracts simultaneously in contrast to theory this comes at a substantial cost for the incumbent

optimal corporate leniency programs this study characterizes the corporate leniency policy that minimizes the frequency with which collusion occurs though it can be optimal to provide only partial leniency plausible sufficient conditions are provided whereby the antitrust authority should waive all penalties for the first firm to come forward it is also shown that restrictions should be placed on when amnesty is awarded though it can be optimal to award amnesty even when the antitrust authority is very likely to win the case without insider testimony