strategic behavior in contests comment almost by definition contests involve strategy this is especially true in contests between unevenly matched contenders in a recent article avinash dixit 1987 explored strategic commitment in contests between a favorite and an underdog the favorite is defined as the player whose chance of victory exceeds one half at the nash equilibrium an underdog s chance is less than one half dixit concludes that if the favorite has the opportunity to move first then he will overcommit effort compared with the nash equilibrium an important implication of the favorite overcommitting effort is that strategic behavior leads to greater social costs see gordon tullock 1980 the opposite holds if the underdog has the opportunity to move first this paper demonstrates that the favorite will never overcommit effort given endogenous order of moves the favorite finds it advantageous to wait until the underdog moves surprisingly the underdog s best strategy is not to wait but to make the first move throwing the first punch the equilibrium order of play is for the underdog to move before the favorite in this equilibrium one never observes overcommitment of effort consequently extending dixit s model to allow for endogenous order of moves suggests that strategic behavior in contests will lead to undercommitment compared with nash behavior

ten little treasures of game theory and ten intuitive contradictions this paper reports laboratory data for games that are played only once these games span the standard categories static and dynamic games with complete and incomplete information for each game the treasure is a treatment in which behavior conforms nicely to predictions of the nash equilibrium or relevant refinement in each case however a change in the payoff structure produces a large inconsistency between theoretical predictions and observed behavior these contradictions are generally consistent with simple intuition based on the interaction of payoff asymmetries and noisy introspection about others decisions

an experimental investigation of asymmetric contests abstract contest theory has been used in industrial organization to describe phenomena like r d races or efforts to defend a monopoly position when pricing behavior is constrained by regulators competition can also take the form of a contest this paper reports on an experimental test of the effects of asymmetry in the tullock contest success function both the simultaneous move and sequential move frameworks are considered despite high levels of overbidding across the different conditions the introduction of asymmetries in the contest function generates experimental behavior on aggregate qualitatively consistent with the theoretical predictions at the individual level behavior seems divided into those subjects who bid very high amounts and those who bid very low amounts

the optimal sorting of players in contests between groups abstract we study how aggregate effort exerted in contests between groups of heterogeneous players depends on the sorting of players into groups we show that the optimal sorting depends on the curvature of the effort cost function from the perspective of a contest organizer whose objective is to maximize aggregate effort it is optimal to sort players in a way that minimizes the variation in ability across groups if the effort cost function is moderately steep however for a sufficiently steep effort cost function the optimal sorting of players may be the one that maximizes the variation in ability across groups

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

the hidden middle the quiet revolution in the midstream of agrifood value chains in developing countries the food security debate has focused largely on the farm sector and on trade relatively neglected or hidden from mainstream debate are the middle segments processing logistics wholesale of agrifood value chains in developing countries and yet this midstream forms 30 40 per cent of the value added and costs in food value chains the productivity of the midstream is as important as farm yields for food security in poor countries the article shows that over the past several decades the middle segments have transformed quickly and surprisingly with a huge volume expansion a proliferation of small and medium enterprises smes but also concentrating and multinationalizing in some places and products with technology change characterized by capital led intensification and with the incipient emergence of branding and labelling and packaging of new organizational arrangements in procurement and marketing interfaces with farmers and retailers and of private standards and contracts economic policies of market and foreign direct investment fdi liberalization commercial and business climate regulations hard and soft infrastructure investment and food safety laws have paved the path to the expansion and shaped the transformation of the important midstream segment of food value chains

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

multiperson tournaments an experimental examination modern hierarchical organizations like corporations must motivate agents to work hard given their pyramid structure it is not surprising that one commonly used motivator is the promotion tournament in such tournaments agents compete to advance to positions at higher organizational levels though these tournaments are common little research has empirically looked at the interface of organizational structure and tournament design this paper aims to take a step in filling this void by comparing the performance of various tournament designs using controlled laboratory techniques

price manipulation in an experimental asset market we analyze in the laboratory whether an uninformed trader is able to manipulate the price of a financial asset by comparing the results of two experimental treatments in the benchmark treatment 12 subjects trade a common value asset that takes either a high or a low value only three subjects know the actual value of the asset while the market is open for trading the manipulation treatment is identical to the benchmark treatment apart from the fact that we introduce a computer program as an additional uninformed trader this robot buys a fixed number of shares in the beginning of a trading period and sells them again afterwards our main result shows that the last contract price is significantly higher in the manipulation treatment if the asset takes a low value and that private information is very well disseminated by both markets if the value of the asset is high finally even though this simple manipulation program loses money on average it is profitable in some instances

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

alliances in the shadow of conflict victorious alliances often fight about the spoils of war this article presents an experiment on the determinants of whether alliances break up and fight internally after having defeated a joint enemy first if peaceful sharing yields an asymmetric rent distribution this increases the likelihood of fighting in turn anticipation of the higher likelihood of internal fight reduces the alliance s ability to succeed against the outside enemy second the option to make nonbinding nonaggression declarations between alliance members does not make peaceful settlement within the alliance more likely third higher differences in the alliance players contributions to alliance effort lead to more internal conflict and more intense fighting

intergroup conflict and intra group punishment in an experimental contest game we study how conflict in a contest game is influenced by rival parties being groups and by group members being able to punish each other our main motivation stems from the analysis of socio political conflict the relevant theoretical prediction in our setting is that conflict expenditures are independent of group size and independent of whether punishment is available or not we find first that our results contradict the independence of groupsize prediction conflict expenditures of groups are substantially larger than those of individuals and both are substantially above equilibrium towards the end of the experiment material losses in groups are 257 of the predicted level there is however substantial heterogeneity in the investment behaviour of individual group members second allowing group members to punish each other after individual contributions to the contest effort are revealed leads to even larger conflict expenditures now material losses are 869 of the equilibrium level and there is much less heterogeneity in individual group members investments these results contrast strongly with those from public goods experiments where punishment enhances efficiency and leads to higher material payoffs

rent seeking mechanism for safety supervision in the chinese coal industry based on a tripartite game model abstract there are extensive governmental rent seeking activities in safety supervision of the chinese coal industry the rents come from industry safety barriers low resource taxes and privilege policies for coalmining enterprises the rent seeking mechanism was analyzed using a model comprising dynamic games with incomplete information the equilibrium results indicate that the probability of national supervision is influenced by penalties and bribery there is negative correlation with penalties and positive correlation with bribery the rent seeking probability of a governmental safety supervision department is influenced by several factors and positively correlates with the cost of national supervision the probability of bribery of coalmining enterprises is influenced by several factors and positively correlates with wages of governmental departments and a reasonable rent seeking range reversed rent seeking reduces the probability of bribery but it s not worth recommending some recommendations are proposed

behavior in group contests a review of experimental research group contests are ubiquitous some examples include warfare between countries competition between political parties team incentives within firms group sports and rent seeking in order to succeed members of the same group have incentives to cooperate with each other by expending individual efforts however since effort is costly each member also has an incentive to abstain from expending any effort and instead free ride on the efforts of other members contest theory shows that the intensity of competition between groups and the amount of free riding within groups depend on the group size sharing rule group impact function contest success function and heterogeneity of players we review experimental studies testing these theoretical predictions almost all studies of behavior in group contests find significant over expenditure of effort relative to the theory we discuss potential explanations for such over expenditure including the utility of winning bounded rationality relative payoff maximization parochial altruism and social identity despite over expenditure most studies find support for the comparative statics predictions of the theory with the exception of the group size paradox finally studies show that there are effective mechanisms that can promote within group cooperation and conflict resolution mechanisms that can de escalate and potentially eliminate between group conflict

contest functions theoretical foundations and issues in estimation contest functions alternatively contest success functions determine probabilities of winning and losing as a function of contestants e ort they are used widely in many areas of economics that employ contest games from tournaments and rent seeking to conflict and sports we first examine the theoretical foundations of contest functions and classify them into four types of derivation stochastic axiomatic optimally derived and microfounded the additive form which includes the ratio or tullock functional form can be derived in all four di erent ways we also explore issues in the econometric estimation of contest functions including concerns with data endogeneity and model comparison

uncertain preassigned non contestable and contestable rents abstract potential beneficiaries of government commitments often face the problem of guaranteeing that the commitments are carried out for example funds can be allocated via the budget but not disbursed the disbursement may be subject to the ambiguities of non specified timing or non specified appropriate conditions potential beneficiaries then have incentives to undertake activities that affect the timing of disbursement of the prespecified funds this paper studies the ensuing rent seeking game against the uncertain behavior or discredibility of the government we show that the resources expended by potential beneficiaries of government rents can be substantial but they cannot exceed 30 of the preassigned rents the extent of rent dissipation is incomplete and approaches unity for the critical value of government discredibility that still induces the individual to engage in rent seeking contestability of the allocated funds now referred to as contestable rents increases the extent of rent seeking outlays nevertheless delayed uncertain contestable rents cannot be overdissipated

endogenous sharing rules in collective group rent seeking this paper examines the possibility of endogenous determination of intra group sharing rules in a collective group rent seeking game collective group rent seeking is considered as a two stage nash cournot game in which sharing rules are determined prior to individual decision on voluntary contribution the solution is subgame perfect and is obtained by backward induction in competition between two groups of the same size the nash equilibrium sharing rule of each group is to distribute rent to each according to relative effort total rent seeking outlays in this case are equal to those obtained by tullock 1980 when more than two groups compete for a rent the sharing rule based on relative effort is again likely to be the nash equilibrium strategy of each group the amount of total rent seeking outlays is also equal to that in tullock 1980 in a nutshell the rent is substantially dissipated if sharing rules are endogenously determined

overbidding and overspreading in rent seeking experiments cost structure and prize allocation rules we study experimentally the effects of cost structure and prize allocation rules on the performance of rent seeking contests most previous studies use a lottery prize rule and linear cost and find both overbidding relative to the nash equilibrium prediction and significant variation of efforts which we term overspreading we investigate the effects of allocating the prize by a lottery versus sharing it proportionally and of convex versus linear costs of effort while holding fixed the nash equilibrium prediction for effort we find the share rule results in average effort closer to the nash prediction and lower variation of effort combining the share rule with a convex cost function further enhances these results we can explain a significant amount of non equilibrium behavior by features of the experimental design these results contribute towards design guidelines for contests based on behavioral principles that take into account implementation features of a contest

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

wholesale food markets with chinese characteristics abstract there has been a growing interest in the role of the chinese wholesale food markets in agricultural development and the food distribution system despite this attention very little is known about these institutions and the way that they operate in this paper some case studies are used to develop the profile of a number of important wholesale markets after an overview of the conceptual role of these markets and how they are perceived by chinese policy makers a survey is conducted of some of the leading markets in beijing nanjing guangzhou shenzhen and shanghai it is argued that gaining a better understanding of these markets will be an important component of analysing the broader food circulation system and food demand and consumption patterns in china

government intervention and strategic trading in the u s treasury market we study the impact of permanent open market operations pomos by the federal reserve on u s treasury market liquidity using a parsimonious model of speculative trading we conjecture that i this form of government intervention improves market liquidity contrary to conclusions drawn by existing literature and ii the extent of this improvement depends on the market s information environment evidence from a novel sample of federal reserve pomos during the 2000s indicates that bid ask spreads of on the run treasury securities decline when pomos are executed by an amount increasing in proxies for information heterogeneity among speculators fundamental volatility and pomo policy uncertainty consistent with our model

rent seeking firms consumer groups and the social costs of monopoly i introduction when a positive monopoly rent is secured under government protection firms compete with one another to win the monopoly by expending resources the opportunity costs of such rent seeking activities the values of goods and services that could be produced with resources expended on such rent seeking activities are part of the social costs of monopoly many economists have examined the social costs of monopoly defining them as the sum of the deadweight loss and the firms rent seeking costs examples include tullock 1967 krueger 1974 posner 1975 rogerson 1982 and fisher 1985 1 recently several economists such as wenders 1987 ellingsen 1991 and schmidt 1992 have pointed out that consumers do not always allow government protection of a monopoly rather consumers often seek government protection of themselves they try to defend their consumer surplus against a monopoly by spending resources for example consumers often lobby politicians for government regulation that requires a natural monopolist to set its price below the unregulated profit maximizing level the opportunity costs of such consumer surplus defending henceforth cs defending activities are also part of the social costs of monopoly an interesting question then becomes whether consumers cs defending activities increase or decrease the social costs of monopoly as compared with those incurred in the case of inactive consumers wenders 1987 argues that consumers cs defending activities lead to higher social costs of monopoly on the other hand ellingsen 1991 and schmidt 1992 show that consumers participation to defend their consumer surplus lowers the social costs of monopoly this paper also addresses the question of whether consumers cs defending activities increase or decrease the social costs of monopoly but differs from previous research by analyzing a model in which the government decides first whether or not to regulate a monopoly and then decides which firm to be the monopolist 2 we compare the social costs of monopoly in the case of active consumers with those incurred in the case of inactive consumers we demonstrate that given just one rent seeking firm consumers cs defending activities generally increase the social costs of monopoly but given two or more rent seeking firms such activities generally reduce the social costs of monopoly section ii sets up the basic model we consider a rent seeking and cs defending henceforth rcs contest with one consumer group it has two stages in the first stage firms and the consumer group compete by expending outlays to win their prizes 3 the prize for each firm is an unregulated monopoly and that for the consumer group is a regulated monopoly each firm and the consumer group choose their outlays simultaneously and independently in the second stage after knowing the government s decision on the form of the monopoly the firms compete against each other to win the monopoly they expend their outlays simultaneously and independently at the end of the second stage the government chooses the winning firm ellingsen 1991 argues that his sequential move framework is more realistic than his simultaneous move framework since in most cases consumers compete against existing monopolists rather than potential ones over the forms of monopolies in his sequential move framework potential monopolists first compete to win the monopoly and then the winner and consumers compete over the form of the monopoly however consider a situation in which the government periodically reassigns a monopoly in this situation consumers compete against potential monopolists including the incumbent monopolist over the form of the monopoly and the firms periodically compete to be the monopolist the sequential move game in this paper is more appropriate for this situation than the sequential move game of ellingsen 1991

endogenous group formation in experimental contests abstract we experimentally study endogenous alliance formation and contest effort choices in a generic three player contest differences in intrinsic or extrinsic incentives to expend effort cause self selection weakly motivated players have an incentive to enter into an alliance and to free ride on strongly motivated players hence strong players prefer to stand alone self selection has direct consequences for effort in endogenously formed alliances but we also find evidence of an effort stimulating effect if players endogenously form an alliance which is in line with theories of in group favoritism the experimental evidence on self selection is in conformity with a theory analysis of the game

information aggregation and manipulation in an experimental market prediction markets are increasingly being considered as methods for gathering summarizing and aggregating diffuse information by governments and businesses alike critics worry that these markets are susceptible to price manipulation by agents who wish to distort decision making we study the effect of manipulators on an experimental market we find that manipulators are unable to distort price accuracy subjects without manipulation incentives compensate for the bias in offers from manipulators by setting a different threshold at which they are willing to accept trades

best of three contest experiments strategic versus psychological momentum abstract we conduct an experimental analysis of a best of three tullock contest intermediate prizes lead to higher efforts while increasing the role of luck as opposed to effort leads to lower efforts both intermediate prizes and luck reduce the probability of the contest ending in two rounds the patterns of players efforts and the probability that a contest ends in two rounds are consistent with strategic momentum i e a momentum generated due to strategic incentives inherent in the contest we do not find evidence for psychological momentum i e a momentum which emerges when winning affects players confidence similar to the previous studies of contests we find significantly higher efforts than predicted and strong heterogeneity in effort between the subjects

reexamining efficient rent seeking in laboratory markets given millner and pratt s 1989 finding of behavior inconsistent with theory we reexamine efficient rent seeking in experimental markets we show that a when r 3 no nash equilibrium exists and therefore behavior has no theoretical benchmark to judge consistency and b when r 1 with a new experimental design utilizing an explicit expected payoff matrix rent seeking behavior is consistent with both nash equilibrium and dissipation hypotheses

the impact of management incentives in intergroup contests abstract in intergroup contests a manager advises and motivates her group s members her rewards often depend on the subsequent contest expenditure of the members i test whether such incentives undermine the credibility and effectiveness of a manager s efforts in the different experimental treatments the managers either benefit from very high or low expenditure or get a predetermined payment the results show that different management incentives shape the expenditure of the group members even if managers have an advisory role only however group members follow recommendations more closely if management compensation is not linked to contest expenditures

rigging the lobbying process an application of the all pay auction textabstractin a world where a politician can explicitly auction off a prize to the high bidder the standard auction literature can be used to analyse political behavior the justice system however precludes politicians from explicitly selling the prize to the highest bidder thus politicians cannot let it become public knowledge that they are in the business of selling political favors an institution has emerged in political markets to overcome this constraint which are termed as lobbying lobbyists make implicit payments to the politician through campaign contributions if these up front payments were rebated to those failing to receive the prize it would be clear that the politician was selling favors this article has examined an interesting principle arising in all pay auctions this principle states that a politician wishing to maximize political rents may find it in his best interest to exclude certain lobbyists from participating in the lobbying process particularly lobbyists valuing most the political prize

experimental comparison of multi stage and one stage contests this article experimentally studies a two stage elimination contest and compares its performance with a one stage contest contrary to the theory the two stage contest generates higher revenue than the equivalent one stage contest there is significant over dissipation in both stages of the two stage contest and experience diminishes over dissipation in the first stage but not in the second stage our experiment provides evidence that winning is a component in a subject s utility a simple behavioral model that accounts for a non monetary utility of winning can explain significant over dissipation in both contests it can also explain why the two stage contest generates higher revenue than the equivalent one stage contest

internet based virtual stock markets for business forecasting the application of internet based virtual stock markets vsms is an additional approach that can be used to predict short and medium term market developments the basic concept involves bringing a group of participants together via the internet and allowing them to trade shares of virtual stocks these stocks represent a bet on the outcome of future market situations and their value depends on the realization of these market situations in this process a vsm elicits and aggregates the assessments of its participants concerning future market developments the aim of this article is to evaluate the potential use and the different design possibilities as well as the forecast accuracy and performance of vsms compared to expert predictions for their application to business forecasting after introducing the basic idea of using vsms for business forecasting we discuss the different design possibilities for such vsms in three real world applications we analyze the feasibility and forecast accuracy of vsms compare the performance of vsms to expert predictions and propose a new validity test for vsm forecasts finally we draw conclusions and provide suggestions for future research

strategic behavior in contests comment in an influential paper avinash dixit 1987 considers a class of symmetric two player contests in which each player s effort xi influences the probability of winning a prize valued at k 0 letting p x1 x2 denote the probability 1 that player 1 wins the expected payoffs of the two players are p1 5 p x1 x2 k 2 x1 and p2 5 1 2 p x1 x2 k 2 x2 dixit s main result is that if there is perfect symmetry between the players and each player s effort has a positive but diminishing marginal effect on his or her probability of winning i e

securing property rights a dilemma experiment in austria mexico mongolia south korea and the united states abstract secure property rights result from a combination of public enforcement private protective measures and voluntary norm compliance we conduct a laboratory experiment to study how culture interacts with institutions in shaping individuals behaviors and group outcomes in a property rights dilemma the experiment is conducted in five countries austria mexico mongolia south korea and the united states we find that the security of property varies with the experimentally available institutions and country level indicators such as trust and quality of government subjects from countries with higher levels of trust are more likely to abstain initially from theft devote more resources to production and support funding public protection of property through taxation our findings highlight the relevance of cultural and institutional factors and their interaction in addressing the collective action problem of safeguarding property rights

a general analysis of rent seeking games in this paper we reconsider the basic model of efficient rent seeking we stress the importance of the shape of the players reaction curve in order to understand the impact of the technology of rent seeking on the structure of the outcome of the game we give a complete characterization of the pure strategy equilibria moreover the possibility of preemption by a stakelberg leader is discussed according to the nature of the technology of rent seeking available to the agents

stock price manipulation it is generally agreed that speculators can make profits from insider trading or from the release of false information both forms of stock price manipulation have now been made illegal in this article the authors ask whether it is possible to make profits from a different kind of manipulation in which an uninformed speculator simply buys and sells shares they show that in a rational expectations framework where all agents maximize expected utility it is possible for an uninformed manipulator to make a profit provided investors attach a positive probability to the manipulator being an informed trader article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

rent seeking in groups abstract rent seeking contests between groups involve conflicts of interests at the levels of individuals groups and the society as a whole we conduct a series of economic experiments to study the behavior of groups and individuals competing against each other in rent seeking contests we find substantial over contribution to rent seeking relative to the equilibrium predictions of standard models regardless whether individuals compete against other individuals groups compete against other groups or individuals compete against groups

the strategic advantage of interdependent preferences in rent seeking contests we study rent seeking contests where the set of players contains two groups of players one with independent preferences and the other with negatively interdependent preferences it turns out that the latter experience a strategic advantage in general two player contests and in n player contests with non increasing marginal efficiency for general n player contests with increasing marginal efficiency the strategic advantage prevails provided convexity of contest technologies is sufficiently weak for strongly convex contest technologies other types of equilibria exist including one where individualists receive strictly higher pay off

orchestrating rent seeking contests contests have different sometimes quite complex organisational structures in particular while most of the existing literature focusses on simultaneous contests multistage contests are also quite frequently encountered this paper seeks to provide a rationale for the latter by endogenising the choice of a contest structure which is made by an organiser of a contest interested in maximising the efforts expended by the contenders

an experimental investigation of efficient rent seeking the debate about the measurement of the amount of rent dissipated in rent seeking activities is unable to be answered by observations from the naturally occurring environment current theoretical investigations have indicated that a number of factors will affect the amount of rent that can be assumed to be dissipated by rent seeking the theory of efficient rent seeking predicts that the number of rent seekers their risk posture their ability to enter and exit the rent seeking process and the manner in which the probability of receiving a rent is determined will affect the amount of rent that is dissipated

continuous ascending vs pooled multiple unit auctions abstract we examine a seldom studied multiple unit auction format known as a pooled auction we use both theory and economic experiments to compare the pooled auction to the continuous simultaneous ascending auction on the grounds of revenue and efficiency generation the results show that due to very aggressive bidding in the pooled auction it generates substantially more revenue than the ascending auction while achieving equivalent efficiency levels we then attempt to explain the overbidding in the pooled auction and find that neither risk nor loss aversion can explain it we present instead a model with an attentional bias that is related to models of probability underweighting and show that it can explain the data

contests with money and time experimental evidence on overbidding in all pay auctions competition for a prize frequently takes the form of dedicating time toward winning a contest those who spend more time become more likely to obtain the prize we model this competition as an all pay auction under incomplete information and report an experiment in which expenditures and rewards are in terms of time in the experiment subjects must stay in the laboratory doing nothing for an initially prespecified length of time however they can bid in terms of time to leave early the auction has an all pay structure so that if an individual does not submit the highest bid within her group she must stay for the additional time that she bid we correlate behavior in this game with behavior in an isomorphic all pay auction played with money bids we also consider how two measures of sophistication the cognitive reflection test crt score and performance on a probability calibration task correlate with behavior we find strong similarities in overall behavior between the auctions conducted with money and with time bidding greater than equilibrium levels is typical and as a consequence average earnings are negative in both auctions thus the result that there is overdissipation of rent in all pay auctions extends to competition in terms of time

comparative statics of contests and rent seeking games this paper develops the comparative statics properties of a contest encountered in patent races and rent seeking games the author shows that symmetric equilibrium expenditure and profit per player decrease with the number of competitors and the discount rate but increase with the value of the prize a fundamental lemma established in the paper shows that a stability condition usually imposed on the model is automatically satisfied the author identifies a class of likelihood or hazard rate functions for which aggregate expenditure increases with the number of competitors and total profits converge to zero copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

contest efforts in light of behavioural considerations this study shows that distortion of probabilities is a possible reason for rent under dissipation incontests with relatively small number of participants such distortion may also result however inover dissipation of the contested rent focusing on contests with homogeneous contestants and thecommonly studied contest success function our main results clarify under what circumstances i rents are more under dissipated relative to the standard situation where probabilities are notdistorted ii rents are under dissipated yet less intensely relative to the standard situation whereprobabilities are not distorted iii rents are over dissipated and iv the contest does not possess asymmetric interior equilibrium in pure strategies

top guns may not fire best shot group contests with group specific public good prizes we analyze a group contest in which n groups compete to win a group specific public good prize group sizes can be different and any player may value the prize differently within and across groups players exert costly efforts simultaneously and independently only the highest effort the best shot within each group represents the group effort that determines the winning group we fully characterize the set of equilibria and show that in any equilibrium at most one player in each group exerts strictly positive effort there always exists an equilibrium in which only the highest value player in each active group exerts strictly positive effort however perverse equilibria may exist in which the highest value players completely free ride on others by exerting no effort we provide conditions under which the set of equilibria can be restricted and discuss contest design implications

historical presidential betting markets this paper analyzes the large and often well organized markets for betting on u s presidential elections that operated between 1868 and 1940 four main points are addressed first we show that the market did a remarkable job forecasting elections in an era before scientific polling second the market was fairly efficient despite the limited information of participants and active attempts to manipulate the odds third we argue political betting markets disappeared largely because of the rise of scientific polls and the increasing availability of other forms of gambling finally we discuss lessons this experience provides for the present

risk aversion in rent seeking and rent augmenting games the effects of risk aversion are examined for two types of expenditures in rent seeking contests a rent seeking expenditures which improve the probability that the rent is obtained and b rent augmenting expenditures which increase the size of the rent to be awarded risk aversion is shown to reduce expenditures of type b unambiguously while having an indeterminate effect on those of type a these two contrasting results are shown to derive from the very different effects rent seeking and rent augmenting expenditures have on the riskiness of a player s position

inter team contests with power differential abstract we investigate the impact of asymmetry on behavior in inter team contests in asymmetric environments one team has a greater probability of winning given the same contribution level unfair contests or has a lower cost of contributing uneven contests we explore how such asymmetries impact behavior asking how being advantaged or disadvantaged influences contributions we find both advantaged and disadvantaged teams contribute much more than theory predicts but in such a way that ex post winning probabilities of the contests are consistent with theoretical predictions at the individual level contributions are predicted by beliefs about own team and opponent team contributions the determinants of contribution by members of the disadvantaged team differ depending on the nature of asymmetry contributions by the disadvantaged team members are responsive to beliefs about contribution by opponents in unfair contests while in uneven contests they are responsive to beliefs about the contribution by teammates

agrifood industry transformation and small farmers in developing countries summary this article introduces this special issue on the rapid transformation of the agrifood industry in developing countries and its effects on small farmers we review the literature from the late 1980s to the present and find evidence first of food processing then retail transformation and mixed evidence of impacts on small farmers both inclusion particularly with resource providing contracts and exclusion sometimes from scale constraint sometimes from inadequate non land assets the special issue papers contribute to the debate by confirming the mix of cases of inclusion and exclusion the cases are main in horticulture and dairy key hopes for smallholder development

risk aversion and rent seeking an extension and some experimental evidence theoretical investigations indicate that the risk attitudes of individuals will effect the amount of rent that can be assumed to be dissipated by rent seeking activities following this line of investigation we extend hillman and katz s work to a small numbers case and demonstrate that the degree to which a monopoly rent is dissipated is dependent upon the structure of the risk attitudes of two risk averse individuals

corporate prediction markets evidence from google ford and firm x despite the popularity of prediction markets among economists businesses and policymakers have been slow to adopt them in decision making most studies of prediction markets outside the lab are from public markets with large trading populations corporate prediction markets face additional issues such as thinness weak incentives limited entry and the potential for traders with biases or ulterior motives raising questions about how well these markets will perform we examine data from prediction markets run by google ford motor company and an anonymous basic materials conglomerate firm x despite theoretically adverse conditions we find these markets are relatively efficient and improve upon the forecasts of experts at all three firms by as much as a 25 reduction in mean squared error the most notable inefficiency is an optimism bias in the markets at google the inefficiencies that do exist generally become smaller over time more experienced traders and those with higher past performance trade against the identified inefficiencies suggesting that the markets efficiency improves because traders gain experience and less skilled traders exit the market

the incidence of overdissipation in rent seeking contests tullock s analysis of rent seeking and overdissipation is reconsidered we show that while equilibrium strategies do not permit overdissipation in expectation for particular realizations of players mixed strategies the total amount spent competing for rents can exceed the value of the prize we also show that the cross sectional incidence of overdissipation in the perfectly discriminating contest ranges from 0 50 to 0 44 as the number of players increases from two to infinity thus even though the original analysis of overdissipation is flawed there are instances in which rent seekers spend more than the prize is worth

behavior in all pay auctions with incomplete information abstract this paper analyzes the behavior of single unit all pay auctions within the independent private values environment in the laboratory we study revenue individual bidding behavior and efficiency in relation to theoretical benchmarks and to a similar study of winner pay first price sealed bid auctions we conclude that the all pay auction yields significantly higher revenue than both the risk neutral bayesian equilibrium and the winner pay auction bidders decisions move closer to equilibrium levels over time in the auction

bidding in hierarchies this paper reconsiders the comparison between hierarchical contests and single stage contests a condition is given that characterizes whether and when the aggregate equilibrium payoff of contestants is higher in the single stage contest and when the single stage contest is more likely to award the prize to the contestant who values it most highly the outcome depends on inter and intra group heterogeneity and is not driven by free rider incentives

informed speculation with imperfect competition competitive rational expectations models have the unsatisfactory property dubbed the schizophrenia problem by hellwig that each trader takes the equilibrium price as given despite the fact that he influences that price an examination of information aggregation in a non competitive rational expectations model using a nash equilibrium in demand functions shows that the schizophrenia problem is avoided by having each trader take into account the effect his demand has on the equilibrium price given a distribution of private information across traders prices reveal less information than in the competition equilibrium and prices no longer become fully informative in the limit as noise trading vanishes or as traders become risk neutral with small traders the model may become one of monopolistic competition not perfect competition in contrast to the competitive model a reasonable model of endogenous acquisition of costly private information is obtained even when traders are risk neutral

do prediction markets produce well calibrated probability forecasts this article presents new theoretical and empirical evidence on the forecasting ability of prediction markets we develop a model that predicts that the time until expiration of a prediction market should negatively affect the accuracy of prices as a forecasting tool in the direction of a favourite longshot bias that is high likelihood events are underpriced and low likelihood events are over priced we confirm this result using a large data set of prediction market transaction prices prediction markets are reasonably well calibrated when time to expiration is relatively short but prices are significantly biased for events farther in the future when time value of money is considered the miscalibration can be exploited to earn excess returns only when the trader has a relatively low discount rate

a manipulator can aid prediction market accuracy prediction markets are low volume speculative markets whose prices offer informative forecasts on particular policy topics observers worry that traders may attempt to mislead decision makers by manipulating prices we adapt a kyle style market microstructure model to this case adding a manipulator with an additional quadratic preference regarding the price in this model when other traders are uncertain about the manipulator s target price the mean target price has no effect on prices and raising the variance of the target price can increase average price accuracy by boosting the returns to informed trading and thereby incentives for traders to become informed

complete rent dissipation when the number of rent seekers is uncertain the focal question in the theory of rent seeking is the extent of rent dissipation as the indicator of social loss in general rent seeking models assume that the number of contenders in a rent seeking contest is known with certainty but given the hidden nature of rent seeking participants in rent seeking more usually can be expected to face an uncertain number of rivals we show that in a tullock contest with a stochastic number of participants complete ex ante rent dissipation is consistent with a pure strategy nash equilibrium this contrasts with but complements previous results of under dissipation when the number of rent seekers is uncertain our complete dissipation result expands the range of circumstances consistent with association of an observed rent with social loss