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

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

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

do expenditures on tobacco control decrease smoking prevalence effectiveness of tobacco control programmes in reducing smoking prevalence during 2001 to 2005 is examined tobacco control spending is found to exert no significant effects on smoking prevalence across the 50 states cigarette prices are found to lower prevalence of daily smokers but exert no effect on nondaily smoking prevalence several reasons are suggested for why these results might conflict with previous research these include that most previous studies examined two states california and massachusetts with long standing tobacco control programmes and that most studies examined periods in which many of the states in their samples did not actively fund their programmes another reason may be that unlike most previous studies this study controls for the possibility that tobacco control spending is endogenous when for example states exhibiting relatively low smoking prevalence are also states with relatively high distaste for smoking and accordingly fund tobacco control programmes more generous

equilibrium binding agreements abstract we study equilibrium binding agreements the coalition structures that form under such agreements and the efficiency of the outcomes that result we analyze such agreements in a context where the payoff to each player depends on the actions of all other players thus a game in strategic form is a natural starting point unlike the device of a characteristic function explicit attention is paid to the behavior of the complementary set of players when a coalition blocks a proposed agreement a solution concept and its applications are discussed journal of economic literature classification numbers c70 c71

the effects of smoking laws on seating allocations of restaurants bars and taverns michael l marlow supporters of smoking laws often argue that they do not harm restaurants bars and taverns and may even raise their profits opponents argue that owners cater to customer preferences regarding smoking and that laws mandating specific smoking policies will therefore negatively impact profits of some firms this article tests hypotheses regarding how smoking laws affect seating allocations using data from a nationwide survey of restaurant and bar owners the empirical evidence indicates that smoking laws exert no significant effect on seating allocations firms are shown to allocate greater shares of seating to nonsmoking use when customers exhibit stronger preferences for such seating jel k2 h0 i introduction laws restricting smoking in restaurants have been enacted in 32 states supporters of these laws often argue that they do not harm firms and may even raise their profits 1 recent studies for instance argue that outright bans on smoking in eating and drinking places have not adversely affected these establishments suggesting that smoking bans either do not reduce demand or lower costs for firms which offsets sales losses thus leading to no adverse changes in profits opponents of smoking restrictions argue that owners cater to customer preferences regarding smoking some owners would find it profitable to allow smoking throughout their establishments others to forbid all smoking and still others to accommodate both smokers and nonsmokers by investing in partitions designating areas creating smoking patios or rooms and or investing in air filtration systems they argue that laws that mandate specific smoking policies will therefore negatively impact profits of some firms little economic research has been published on the effects of smoking laws on revenues of restaurants bars and taverns and none has been directed toward the issue of smoking nonsmoking seating allocations 2 this article provides a framework for examining how customer preferences influence smoking and nonsmoking seating allocations by owners the primary policy that firms unilaterally adopt in their attempts to deal with the issue hypotheses regarding how smoking laws affect seating allocations are then tested using data from a nationwide survey of 1 300 restaurant bar and tavern owners the empirical evidence indicates that smoking laws exert no significant effect on seating allocations ii economic model and testable hypotheses without legal restrictions policies adopted by restaurants bars and taverns toward smoking are determined in much the same manner as decisions regarding menus prices and hours of operation profit maximizing firms optimize on the basis of customer demand and costs decisions pertaining to smoking policies simply allocate the air space within firms between smoking and nonsmoking customers 3 the air space within an establishment is considered just like any other resource and owners decide to cater solely to smokers to nonsmokers or to both by providing patrons with rights to smoke while accommodating others through smoking nonsmoking areas and air filtration systems the choice depends on customer preferences and relative marginal costs 4 predictably market segmentation naturally evolves where firms cater more to smokers in markets dominated by smokers than in those markets dominated by nonsmokers there may also be broad differences between how owners of restaurants and bars or taverns allocate seating customers of restaurants are likely to prefer that owners adopt different accommodation strategies than would patrons of bars and taverns restaurant customers tend to dine in one location within firms and therefore it is possible for owners to designate sections for smokers and nonsmokers and this predictably leads to a relatively high allocation of nonsmoking seating in contrast customers of bars and taverns may prefer to participate in various activities dining drinking listening to music dancing and playing pool darts and billiards whereby they move to different locations within the establishment during their visit and interact with different patrons

pedagogic comment and the supply of land for a particular use this article continues the recent debate in urban studies on the supply of land it specifies the analytical framework corrects misinterpretations of wiltshaw 1985 emphasises the possibility of the individual possessing a powerful welfare effect and a backward bending land supply curve and stresses the need to consider the distributions of non land income and landownership as well as the form of the utility function when aggregating supply for a particular use

effectiveness of massachusetts comprehensive tobacco control program while massachusetts s comprehensive programme of excise taxes smoking bans and tobacco control has been argued to have significantly lowered cigarette consumption this is the first study to examine the comprehensive nature of its programme and to control for factors other than tobacco programmes themselves while examining effects on taxed cigarette sales examination indicates strong support for the hypotheses that taxed sales in massachusetts declined due to price increases changes in income and smuggling there is very limited support for the hypothesis that tobacco control spending or smoking bans contributed to falling cigarette sales possibilities are discussed that may explain why this study does not support most previous studies these include failure to control for numerous factors that probably also influenced sales that effects of tobacco control programmes might differ between states and that previous studies examined shorter time periods it is hoped that this article will foster further

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

value functions for infinite period planning cost benefit and risk analysis studies that model tradeoffs between the present and the distant future by means of present value discounting have been criticized for according the future and thus future generations far too little importance this paper presents an alternative means of modeling tradeoffs between different periods that accords the future far more importance than present value discounting and that is no more difficult to apply the paper also presents a means of modeling the preference issue of concern for equity or stability between different periods

determinants of state tobacco control expenditures while centers for disease control and prevention believe that most state governments under fund tobacco control programs little is known about why large variation in spending exists between state governments this study explores reasons for spending variation through an econometric model of per capita spending on tobacco control programs that explores the effects of smoking prevalence while holding constant tobacco settlement funds state budget deficits and other factors that might also be expected to influence spending variation empirical evidence indicates no support for the hypothesis that states with high smoking prevalence spend more on tobacco control than other states this finding may be quite surprising to those working in areas of public health and clearly leads to many important policy questions regarding why the data indicate that funding does not appear to bear any relation to perceived public health problems as would be predicted if policymakers were following a rational needs approach

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

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

coalition formation as a dynamic process abstract we study coalition formation as an ongoing dynamic process with payoffs generated as coalitions form disintegrate or regroup a process of coalition formation pcf is an equilibrium if a coalitional move to some other state can be justified by the expectation of higher future value compared to inaction this future value in turn is endogenous it depends on coalitional movements at each node we study existence of equilibrium pcfs we connect deterministic equilibrium pcfs with unique absorbing state to the core and equilibrium pcfs with multiple absorbing states to the largest consistent set in addition we study cyclical as well as stochastic equilibrium pcfs

drunk driving after the passage of smoking bans in bars abstract using geographic variation in local and state smoke free bar laws in the us we observe an increase in fatal accidents involving alcohol following bans on smoking in bars that is not observed in places without bans although an increased accident risk might seem surprising at first two strands of literature on consumer behavior suggest potential explanations smokers driving longer distances to a bordering jurisdiction that allows smoking in bars and smokers driving longer distances within their jurisdiction to bars that still allow smoking perhaps through non compliance or outdoor seating we find evidence consistent with both explanations the increased miles driven by drivers wishing to smoke and drink offsets any reduction in driving from smokers choosing to stay home following a ban resulting in increased alcohol related accidents this result proves durable as we subject it to an extensive battery of robustness checks

endogenous formation of coalitions the formation of coalitions is a fundamental problem in game theory by a coalition is meant a group of players e g economic or political agents which decide to act together as one unit relative to the rest of the players this includes the instances of syndicates unions cartels blocks political parties parliamentary coalitions etc we would like to emphasize that forming a coalition does not eliminate the individual players as decision makers in all interactions with the other players coalition members act as one unit it may be useful to think of a representative agent taking their place 2 however this arrangement will continue only as long as each player finds it desirable to act this way further bargaining occurs among the members of each coalition on how to divide what they obtained together thus the existence of coalitions implies that the interactions among the players will be conducted on two levels first among the coalitions and second within each coalition most of the existing models in economics and game theory assume that the coalition structure is given exogenously instead we try here to obtain it as an endogenous outcome of our model namely we want to be able to predict which coalitions will in fact form in each given situation 3 our theory combines two kinds of game theoretic concepts value and stability the basic idea is first to evaluate the players prospects in the various coalition structures and then based on these values to find which ones are stable we will call this value coalition structure value or cs value for short the reason we are considering coalition structures i e partitions of the set of players into disjoint coalitions rather than just coalitions is that in general players may find it to their advantage to join forces in some situations and to act separately in others all depending on the way the other participants are organized this implies that both the value and the stability concepts should depend on the entire coalition structure the cs value we analyze in this paper was first developed by owen 7

collective action and the group size paradox according to the olson paradox larger groups may be less successful than smaller groups in furthering their interests we address the issue in a model with three distinctive features explicit intergroup interaction collective prizes with a varying mix of public and private characteristics and nonlinear lobbying costs the interplay of these features leads to new results when the cost of lobbying has the elasticity of a quadratic function or higher larger groups are more effective no matter how private the prize with smaller elasticities a threshold degree of publicness is enough to overturn the olson argument and this threshold tends to zero as the elasticity approaches the value for a quadratic function we also demonstrate that these results are true irrespective of whether we examine group sizes over the cross section in some given equilibrium or changes in the size of a given group over different equilibria

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

rents producers surplus and the long run industry supply curve the term producer surplus conventionally has been used to refer to the area above the competitive industry supply curve for output and below the equilibrium price for the short run there is general agreement as to the meaning of this area in the short run this area equals the payments to the firm in excess of the firm s total variable costs such payments are often referred to as quasirents for the long run there is no general agreement as to the meaning of this area some claim that this area has no particular meaning except under very special circumstances for example see mishan 7 221 22 225 30 and formby 1 316 323 24 others argue that this area is equal to the rents paid to factors of production for example see shepherd 9 and helmberger and rosine 2 helmberger and rosine 2 were the only ones to present an analytical example to support their position they demonstrated that producer surplus will in fact equal rents if i an aggregate production function is used ii the production function has four inputs is of the cobb douglas variety and exhibits constant returns to scale and iii two of the industry input supply functions are log linear and two are perfectly elastic the current paper brings the analysis down to the level of the individual firm and significantly extends the result of helmberger and rosine 2 it is demonstrated that producer surplus equals rents whenever the individual firm has a u shaped long run average cost curve regardless of i the form of the industry input supply functions and ii the number of inputs throughout the paper the analysis is general that is no specific functional forms are used

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

transaction costs of alternative greenhouse gas policies in the australian transport energy sector abstract this study employs a comparative analysis of the transaction costs of alternative policy instruments the institutional approach to the allocation of resources is emerging to supplement traditional analyses of market and government failures the causes of these failures are many but often point to high transaction costs that result largely from institutional impediments effective institutions can help reduce transaction costs through more effective signals and incentives including information generation to help markets function more efficiently and policies to be delivered more successfully the study which contributes to transaction costs measurement finds that the magnitudes and types of transaction costs associated with setting up and implementing three greenhouse gas reduction policy programs in australia are substantial and different the estimated transaction costs of the tradable permit and fee system are relatively high compared to those of the mandatory fuel label program and the voluntary fuel efficiency program which supports the view that market based policies can also be costly to deliver notwithstanding transaction costs have frequently been ignored in cost benefit analyses it is concluded that transaction costs need to be considered alongside other costs and benefits in the assessment of policies

an aggregate measure for benefit cost analysis the kaldor hicks kh criterion has long been the standard for benefit cost analyses but it has also been widely criticized as ignoring equity and arguably moral sentiments in general we suggest the use of an aggregate measure khm instead of kh where m stands for moral sentiments khm simply adds to the traditional kh criterion the requirement that all goods for which there is a willingness to pay or accept count as economic goods this addition however runs up against objections to counting moral sentiments in general and non paternalistic altruism in particular we show these concerns are unwarranted and suggest that the khm criterion is superior to kh because it provides better information

investment in the absence of property rights the role of incumbency advantages in many situations the individuals who can generate some output must enter a contest for appropriating this output this paper analyses the investment incentives of such agents and the role of incumbency advantages in the contest depending on the advantages an increase in the productivity of the investment can decrease or increase the amount of investment the results are applied to autocrats investment behavior and job specific investment in organizations

the us national tobacco settlement the effects of advertising and price changes on cigarette consumption this paper provides an econometric analysis of the effects of cigarette price and advertising changes stemming from the united states tobacco settlement of 1998 this is done by estimation of a demand function for cigarettes based on data from both before and after the settlement the model is estimated using monthly time series data for the period 1990 2000 results show that the increase in cigarette prices stemming from the settlement reduced per capita cigarette consumption in the usa by 8 3 however the cigarette companies also increased advertising in the years immediately preceding and following the settlement this study estimates that this increased advertising partially offsets the effects of the higher prices increasing cigarette consumption by 2 7 to 4 7 and hence blunting the effects of the price increase by 33 57

rent seeking with non identical sharing rules an equilibrium rescued nitzan s 1991 analysis of differential sharing rules in a collective rent seeking setting is reconsidered two groups each with more than one member are presumed to use different linear combinations of two sharing rules one based on an equal division of the prize and the other on each member s relative effort we show that an equilibrium always exists for this type of game and then characterize the equilibrium our result is contrary to nitzan s claims that a in the general case an equilibrium often does not exist and b an equilibrium never exists when the groups use the polar extreme rules

the supply of land the supply of land to a use may result from individual suppliers maximizing utility as a consequence the slope of the supply curve cannot be determined a priori supply will be influenced by the distribution of non land income different tenure categories will behave according to the balance of substitution and welfare effects compulsory purchase may be necessary to surmount individual preferences and the effect of a development gains tax on change of use will depend upon the relation between the rate of tax the tax base and the supplier s compensating variation

reducing conflict in global warming policy the potential of equity as a unifying principle abstract international agreement on global warming mitigation is likely to prove difficult efficiency based policies will result in disparate costs and benefits among nations and thus hinder cooperation this paper suggests that consideration be given to an equitable sharing of the economic impacts of global warming policy acknowledging that there is no universally held concept of equity the policy implications of several alternatives are explored because there is considerable variation in these implications it will be important for decision makers to clarify their preferred concepts of equity during the course of their negotiations on policies to address global warming

inefficiency as a strategic device in group contests against dominant opponents i introduction many strategic situations in economics and politics can be understood as contests rd nitzan and ueda 2009 a private good nitzan 1991a 1991b nitzan and ueda 2009 or a mixed good esteban and ray 2001 nitzan and ueda 2011 to a large extent the intensity of free riding or conversely the motivation for individuals to exert effort in a contest is shaped by the intra group incentive scheme or governance structure in standard contests incentives are inseparably linked to the sharing rule i e to the usually exogenous procedure by which the rents acquired in the contest are distributed within the group 1 in a number of economic applications however incentives to exert effort appear to be separate or are even willfully separated from the sharing rule phenomena such as team spirit akerlof and kranton 2005 identification with the group sherif 1966 bornstein and ben yossef 1994 peer pressure kandel and lazear 1992 or social norms to contribute to the social good elster 1989 are examples for this separation alternatively groups could apply selective incentive schemes based on relative performance lazear and rosen 1981 or marginally align individual and group incentives nitzan and ueda 2009 in all these scenarios individuals behave cooperatively i e in the interest of the entire group even if the final distribution of rents follows a standard sharing rule mechanisms to induce cooperation often are costly sanchez pages and straub 2010 may only work under restrictive conditions che and gale 2003 require strategic coordination among individuals hardin 1995 or cannot be ensured to be obeyed unanimously oliver 1980 this might explain why they do not emerge universally or automatically the point we make in this article is even stronger even if there existed perfect and costless solutions to within group free riding problems which will henceforth be called intra group efficient incentive schemes igeis they might not always be adopted why would a group for which an igeis is freely available not wish to utilize it but rather adopt an apparently inefficient governance structure by definition an igeis internalizes all within group externalities and seems to be a safe way to increase one s payoffs however this reasoning ignores repercussions that arise in strategic environments like contests suppose for example that the competing groups have sufficiently unequal strengths say due to unequal sizes or different comparative advantages then the weaker group may refrain from implementing a costless igeis to avoid the contest from heating up adoption of an igeis makes a group more efficient and consequently more aggressive in the contest on one hand higher efforts constitute a cost on the other they affect the share of the rent that this group can hope to acquire or the likelihood of succeeding in the contest 2 an igeis clearly enhances a group s prospects if the other group did not change its behavior however if members of the opponent group reply with a sufficiently strong increase in their contest efforts this diminishes and may potentially more than offset the gains from one s own increased efforts whether this happens depends on the direction of the strategic interaction between groups the detrimental firing back effect can only become relevant if the other group s efforts are sufficiently strong strategic complements to one s own efforts

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