war and natural resource exploitation abstract we build a theoretical framework that allows for endogenous conflict behaviour i e fighting efforts and for endogenous natural resource exploitation i e speed ownership and investments while depletion is spread in a balanced hotelling fashion during peace the presence of conflict creates incentives for rapacious extraction as this lowers the stakes of future contest this voracious extraction depresses total oil revenue especially if world oil demand is relatively elastic and the government s weapon advantage is weak some of these political distortions can be overcome by bribing rebels or by government investment in weapons the shadow of conflict can also make less efficient nationalized oil extraction more attractive than private extraction as insecure property rights create a holdup problem for the private firm and lead to a lower license fee furthermore the government fights less intensely than the rebels under private exploitation which leads to more government turnover without credible commitment to future fighting efforts private oil depletion is only lucrative if the government s non oil office rents are large and weaponry powerful which guarantees the government a stronger grip on office and makes the holdup problem less severe

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

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

strategic behavior in contests reply in my 1987 paper i modeled contests where the probability of each player winning a prize depends on all players efforts and examined the first order benefits to one player of making a commitment to a strategy slightly different from his nash equilibrium strategy in the special case of a two player symmetric contest i found that this first order effect was zero michael r baye and onsong shin 1999 have taken the useful further step of finding the second order conditions which ensure that the local stationary point is a local maximum they also find an example where such a commitment has a third order benefit whether this is of any substantive economic interest remains to be seen i used the phrase no local effect to mean zero first order effect which was clearly a sloppy use of language but some such restriction on the use of local is essential if the phrase x has no local effect on f x at x 5 a were to mean that all derivatives f a are zero then a taylor series expansion would show that f x 5 f a for all x and no local effect would be the same as no global effect most importantly symmetric contests were only a very special case of my model the focus was on the much more interesting and more general situation of asymmetry among the players where one player s commitment to a strategy different from his nash equilibrium strategy does bring him a first order benefit the favorite benefits by committing to excessive effort and the underdog from committing to too little others for example kyung h baik and jason f shogren 1992 have extended the analysis to endogenize the order of moves and found that it can be in the interests of both contestants to let the underdog make the commitment in my view these are the more interesting economic issues to do with contests than are third order effects in the symmetric case

endogenous timing in games of commercial policy this paper analyzes various equilibria associated with intervention in trade in the context of noncooperative policy games with endogenous timing it is shown that while the subgame perfect equilibria in quota games always involve sequential play that is not necessarily the case in tariff games one implication of the analysis is that in contrast to existing theory trade is not eliminated in quota games another implication is that quotas are not necessarily inferior to tariffs the paper also examines the ways policy leaders and followers differ in their preferences over instruments and allows the choice over instruments to be determined endogenously this paper analyses various equilibria associated with intervention in trade in the context on non cooperative policy games with endogenous timing it is shown that while the subgame perfect equilibria in quota games always involve sequential play that is not necessarily the case in tariff games one implication of the analysis is that in contrast to existing theory trade is not eliminated in quota games another implication is that quotas are not necessarily inferior to tariffs the paper also examines the ways policy leaders and followers differ in their preferences over instruments and allows the choice over instruments to be determined endogenously

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

strategic offering for a wind power producer as a result of subsidies and technological maturity renewable electricity producers have grown in some jurisdictions to clearly dominant positions in the market under this context we propose an offering strategy for a wind power producer with market power that participates in the day ahead market as a price maker and in the balancing market as a deviator uncertainty pertaining to wind power production and balancing market price is represented through a set of correlated scenarios the proposed model is a stochastic mathematical program with equilibrium constraints mpec that can be recast as a tractable mixed integer linear programming milp problem which is solvable using available optimization software results from an illustrative example and two case studies show the effectiveness of the proposed model

shipwrecks and treasure hunters we examine dynamic search as a game in which two rivals explore an island for a hidden prize of known value in every period until its discovery the players decide how much of the unsearched area to comb if a player finds the prize alone he wins it and the game ends players have a per period discount factor and costs proportional to the area they search first as a benchmark for efficiency we solve the one player search problem second in the two player setting we show that typically there is inefficient over search a result akin to the tragedy of the commons however for players with intermediate levels of patience there is the possibility of inefficient under search as players incorporate the expected future payoffs in their current search decisions finally with patient players several counterintuitive results can arise for example players might be better off searching a larger island or looking for a less valuable prize

multimarket competition theory and evidence the multimarket perspective identifies potential entrants as existing firms in related markets the paper uses this new framework to analyze entry strategies and entry deterrence successful entry permitting and entry deterring strategies require understanding of the feedbacks from the entry market to the home market and vice versa the multimarket perspective integrates literature on industrial organization and strategic management

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

the strategic equivalence of rent seeking innovation and patent race games abstract we establish the strategic equivalence of a variety of rent seeking contests innovation tournaments and patent race games the results allow us to disentangle negative and positive externalities and to apply theorems and results intended for rent seeking games to other games and vice versa we conclude with several examples that highlight the practical utility of our results

a general model of rent seeking for public goods this paper generalizes the model of collective rent seeking over a public good expanding the rent seeker s consumption bundle to include preferences over the public good and a private good our results suggest collective rent seeking is positively related to group size although free riding exists within a group there is not a one for one tradeoff in addition rent seeking increases with wealth finally total effort expended by both groups increases if either group increases in membership size except in the case of an extremely lopsided contest the key condition underlying these results is that the marginal utility of the public good is not inversely related to the private good

creating balance in dynamic competitions abstract we consider incentives for organizing competitions in multiple rounds focusing on situations where there is heterogeneity among the contestants ex ante which discourages effort in a single contest heterogeneity evolves across rounds depending upon the outcomes of previous rounds we present conditions under which balance in such a competition can be created by determining the number of rounds and dividing the prize fund carefully across them so that full rent dissipation entails in the model each round is an all pay auction where contestants differ in their abilities to gain a momentum from winning we also discuss the case when negative prizes are feasible demonstrating that this strengthens the full dissipation result and we consider a case where the size of the winner s momentum is related to the size of the prize attained showing that the stronger this linkage the less of the prize is awarded early on

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

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

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

endogenous timing in contests with delegation i introduction contests with delegation where each player hires a delegate to expend effort or resources on the player s behalf to win a prize are common 1 an example is litigation between a plaintiff and a defendant in which each litigant hires an attorney who expends his effort to win the lawsuit on behalf of his client another example is a rent seeking contest in which each firm hires a lobbyist who expends his effort to acquire a monopoly or a procurement contract from the government on behalf of his client yet another example is a patent contest in which each firm hires a group of independent researchers or university professors who conduct research to obtain a patent on behalf of their employer delegation is attractive to players because they each can use superior ability by hiring a delegate with more ability than herself and achieve strategic commitments through delegation in such contests with delegation we believe delegates decide endogenously when to expend their effort after signing delegation contracts indeed pursuing their self interest the delegates may well endogenize the order of their moves and communicate it with each other before they expend their effort we believe also that players take it into account when designing their contracts for the delegates that the delegates will endogenize the order of their moves it is these ideas that motivate this paper accordingly the purpose of this paper is to systematically study contests with delegation in which delegates decide endogenously when to expend their effort after signing delegation contracts and before they expend their effort we study two player contests with delegation focusing on not only the equilibrium delegation contracts between players and their delegates but also the equilibrium orders of the delegates moves specifically we set up and analyze the following three stage game in the first stage two players each hire a delegate and they simultaneously announce their contracts written with their delegates each player s contract specifies how much her delegate will be paid if he wins the contest and how much if he loses it in the second stage each delegate decides when to expend his effort and the delegates announce their decisions simultaneously in the third stage the delegates expend their effort according to their decisions in the second stage to win the prize on behalf of their employers we show that in equilibrium the delegate hired by the higher valuation player chooses his effort level after observing his counterpart s and his expected payoff is greater than that of his counterpart this advantage of the delegate of the higher valuation player can be explained by the fact that his employer the higher valuation player offers better contingent compensation as it will be defined in section ii to him than the lower valuation player does to her delegate we compare the outcomes of the endogenous timing framework the three stage game presented above with those of the simultaneous move framework the game which is the same as the three stage game with the exception that the delegates choose their effort levels simultaneously and this order of their moves is given exogenously an interesting result is that each player offers her delegate a better contract in the endogenous timing framework than in the simultaneous move framework another interesting result is that unless the valuation for the prize of the higher valuation player is significantly greater than that of the lower valuation player then each delegate s expected payoff is greater in the endogenous timing framework than in the simultaneous move framework whereas each player s expected payoff is less in the endogenous timing framework than in the simultaneous move framework in summary pursuing their self interest the delegates decide endogenously when to expend their effort given contracts between the players and the delegates

local matching of flexible load in smart grids abstract today s power systems are experiencing a transition from primarily fossil fuel based generation toward greater shares of renewable energy sources it becomes increasingly costly to manage the resulting uncertainty and variability in power system operations solely through flexible generation assets incorporating demand side flexibility through appropriately designed incentive structures can add an additional lever to balance demand and supply based on a supply model using empirical wind generation data and a discrete model of flexible demand with temporal constraints we design and evaluate a local online market mechanism for matching flexible load and uncertain supply under this mechanism truthful reporting of flexibility is a dominant strategy for consumers reducing payments and increasing the likelihood of allocation suppliers during periods of scarce supply benefit from elevated critical value payments as a result of flexibility induced competition on the demand side we find that for a wide range of the key parameters supply capacity flexibility level the cost of ensuring incentive compatibility in a smart grid market relative to the welfare optimal matching is relatively small this suggests that local matching of demand and supply can be organized in a decentral manner in the presence of a sufficiently flexible demand side extending the stylized demand model to include complementary demand structures we demonstrate that decentral matching induces only minor efficiency losses if demand is sufficiently flexible furthermore by accounting for physical grid limitations we show that flexibility and grid capacity exhibit complementary characteristics

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

a primer on cardinal versus ordinal tournaments i introduction the tournament literature has considered primarily two relative performance evaluation schemes that are consistent with what we observe in practice the rationale behind each of these incentive schemes is that relative performance evaluation is useful when agent performance is subject to common shocks in which case individual performance is not a sufficient statistic for individual effort that is the performance of other agents can enhance the inference of the effort exerted by an individual agent one important difference between these schemes is that under rank order or ordinal tournaments the prizes are prespecified and agents compete for rank by contrast under two part piece rate or cardinal tournaments the total prize is fixed and agents compete for a share of the pie 1 each agent receives a base payment and a bonus depending on the difference of his performance from the average performance of his peers 2 average performance provides an informative signal about the value of common shocks inflicted on agents ordinal tournaments are prevalent in contests where rank is more important than individual performance for instance sports contests where contestants compete for medals or fixed prizes or when individual performance data are not readily available for instance promotion contests where the individual contribution of contestants cannot easily be separated from that of their co workers or subordinates by contrast cardinal tournaments are popular in several occupations or industries where cardinal performance data are readily available e g salesmen contracts physician contracts with hmos and agricultural contracts 3 both ordinal and cardinal tournaments are relatively simple to design even though they are only proxies of theoretically optimal schemes 4 prior literature has contrasted the efficiency properties of either ordinal or cardinal tournaments against those of piece rates under piece rates each agent is evaluated according to his absolute performance thus agents receive a base payment and a bonus which is based typically linearly on their individual output 5 piece rates are sometimes expressed as fixed performance standards when an agent s performance is evaluated against a fixed standard instead of the average output obtained lazear and rosen 1981 green and stokey 1983 and nalebuff and stiglitz 1983 have shown that ordinal tournaments are superior to piece rates when agent activities are subject to common shocks that affect performance 6 more recently marinakis and tsoulouhas 2012 2013 investigated and verified this result for cardinal tournaments relative performance evaluation via tournaments constitutes a pareto superior move by removing common uncertainty from the responsibility of agents and by charging a premium for this insurance the principal increases his profit without hurting the agents moreover by providing this type of insurance tournaments enable the principal to implement higher power incentives than under piece rates what is still an open question in the literature above is a comparison of ordinal to cardinal tournaments the consensus among tournament theorists is that even though ordinal tournaments are informationally wasteful as in holmstrom 1982 by ignoring the agents cardinal performance data if available they are however more general because they are less restrictive on the functional form of the contract i e they are step functions with a linear or non linear trend part of the appeal is that the founders of tournament theory focused on ordinal tournaments nevertheless a significant part of the current tournament literature has analyzed cardinal tournaments instead 7 this paper fills in this gap in theory by developing a framework that can be used to analyze both cardinal and ordinal tournaments as well as piece rates and in doing so it provides a primer on tournaments and piece rates

a stochastic multi layer agent based model to study electricity market participants behavior this paper presents a new stochastic multi layer agent based model to study the behavior of electricity market participants the wholesale market players including renewable power producers are modeled in the first layer of the proposed multi agent environment the players optimize bidding offering strategies to participate in the electricity markets in the second layer responsive customers including plug in electric vehicle pev owners and consumers who participate in demand response dr programs are modeled as independent agents the objective of the responsive customers is to increase their benefit while retaining welfare the interaction between market players in day ahead and real time markets is modeled using an incomplete information game theory algorithm due to the uncertainties of resources and customers behavior the model is developed using a stochastic framework a case study containing wind power producers wpps pev aggregators and retailers providing dr is considered to demonstrate the usefulness and proficiency of the proposed multi layer agent based model

risk attitudes and heterogeneity in simultaneous and sequential contests we prove existence and uniqueness of equilibrium in rent seeking contests in which players are heterogeneous in both risk preferences and production technology given identical linear production technology if the number of risk loving players is large enough the aggregate investment in equilibrium will exceed the rent and all risk neutral and risk averse players will exit the contest in simultaneous and sequential contests with two players we can identify the favorite and underdog based on both players preference parameters our theoretical results suggest that subjects in some recent contest experiments behaved as if they were risk loving

a two stage model of research and development with endogenous second mover advantages this paper describes a simple two stage model of research and development in which the winner of the research stage has the option of moving first in the development stage some unexpected results emerge in equilibrium the leader in the development stage invests less than each follower and is consequently least likely to collect the patent moreover the leader receives a lower expected payoff than each of the followers thus there are endogenous second mover advantages using a game of timing in which the identity of the stackelberg leader is determined to link the two stages i find that firms face quite different incentives in the research stage although the leader invests less than each follower in the research stage as well the leader enjoys higher expected revenue from the complete two stage game than does each follower the equilibrium is inefficient because there is a lag between the time at which research is completed and the time at which development is begun and because aggregate investment is inefficiently asymmetrically distributed across firms

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

strategic behavior of multi energy players in electricity markets as aggregators of demand side resources using a bi level approach the coordination of various energy vectors under the concept of multi energy system mes has introduced new sources of operational flexibility to system managers in this paper the behavior of multi energy players mep who can trade with more than one energy carrier to maximize their profits and mitigate their operational risks has been investigated the mes is represented based on a multilayer structure namely the energy market mep the local energy system les and multi energy demand in such environment an mep aggregates les and participates in the wholesale electricity market simultaneously to maximize its profit the decision making conflict of the mep with other energy players for the aggregation of les and participation in the electricity market is modeled based on a bilevel approach numerical results show the behavior of the mep as a prosumer in the electricity market to produce smoother demand and price profiles results reveal a mutual effect of local and wholesale equilibrium prices by increasing the share of the mep

on the evolution of attitudes towards risk in winner take all games abstract a long standing conjecture is that winner take all games such as patent races lead to the survival of risk takers and the extinction of risk averters in many species a winner take all game determines the males right to reproduce and the same argument suggests that males will evolve to be risk takers psychological and sociological evidence buttresses the argument that males are more risk taking than females using an evolutionary model of preference formation we investigate to what extent evolution leads to risk taking in winner take all environments journal of economic literature classification numbers c7 d8

endogenous strength in conflicts in this paper we study a two period contest where the strength of players in the second period depends on the result of the contest in the first stage we show that in contrast to one shot contests in the same setting heterogeneous players exert different efforts in the first stage and rent dissipation in the first period may be large we study the conditions under which the discouragement effect holds in addition new issues emerge like the evolution of the strengths and the shares of the prize during the game

are tournaments optimal over piece rates under limited liability for the principal a highly acclaimed result is that tournaments are superior to piece rates when the agents are risk averse and their production activities are subject to a relatively large common shock the reason is that tournaments allow the principal to trade insurance for lower income to the agents our analysis shows that this celebrated result does not carry over to the case when a limited liability bankruptcy constraint limits the payments the principal can make provided that the liquidation value of the firm is sufficiently small this finding has important implications for the vast number of limited liability firms even though limited liability becomes an issue for different ranges of liquidation values under the two schemes tournaments are still superior when the liquidation value of the firm is intermediate or large even though the limited liability constraint is still binding for intermediate values surprisingly uncertainty in the price of output strengthens the need for tournaments by expanding the range of liquidation values over which tournaments are dominant because price uncertainty introduces additional bankruptcy risk these findings provide insight into policy implications in the contracting out of services by state and local governments in procurement in rent seeking contests and in tournaments used by hmos

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

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

application of fuzzy q learning for electricity market modeling by considering renewable power penetration abstract by increasing renewable resource penetration the need for developing fast and reliable market modeling approaches in the presence of these resources has gained greater attention in this paper fuzzy q learning approach is proposed for hour ahead electricity market modeling in presence of renewable resources the proposed approach is implemented on ieee 30 bus test system the effectiveness of the proposed approach is evaluated and compared with q learning approach for both normal and stressful cases simulation results indicate that the proposed approach is able to model electricity market for a range of continuous multidimensional renewable power penetration in considerably less iterations compared with q learning approach moreover the probability of finding nash equilibrium is becoming higher by using fuzzy q learning approach while the other indices such as average social welfare average of locational marginal prices lmps and average standard of deviation of lmps do not change considerably

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

monopolistic competition and multiproduct brand names the excess capacity theorem pertaining to monopolistic competition implies a trade off between variety and cost this article shows that the excess capacity theorem does not hold if firms market several products under a single brand name and if marketing efforts spill over from one product to another the argument of the article requires that selling efforts not be prejudged to be wasteful or redundant a position adopted and defended in harold demsetz s writing on monopolistic competition within that framework the article constructs a counterexample to the excess capacity theorem copyright 1989 by the university of chicago

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

information in conflicts abstract we consider two player contests for a prize of common but uncertain value for settings where one player knows the value of the prize while the other only knows its prior distribution we give conditions for when the uninformed agent is ex ante strictly more likely to win the prize than is the informed agent in the special case of a lottery contest equilibrium expenditures are lower under asymmetric information than if either both agents are informed or neither agent is informed

walrasian market clearing for demand response exchange this paper presents the design and evaluation of an effective market clearing scheme for trading demand response dr in a deregulated power system the proposed scheme is called demand response exchange drx in which dr is treated as a public good to be exchanged between two groups of participating agents namely dr buyers and dr sellers while buyers require dr and are willing to pay for it sellers have the capacity to curtail customer loads to supply dr on request the drx market clearing scheme uses walrasian auctions where agents update their dr quantity bids in response to prices adjusted by the market operator this auction is repeated iteratively until market equilibrium is obtained at the point where the market outcome is proven to be pareto optimal the proposed scheme is tested on a small power system and its effectiveness substantiated

distributional conflict and jurisdictional organization abstract this paper explores the endogenous formation of jurisdictions assuming the political process is a costly fight to acquire shares of the gnp pie in such a setting the stability of a unified jurisdiction is not necessarily determined by the preferences of the richest member region we also show that a system of federalism is especially significant in ameliorating distributional competition and conflict less resources are spent in aggregate on appropriative activities under a hierarchical system of federalism than in a unified jurisdiction with a single central government

early round upsets and championship blowouts i introduction popular discussions of tournament play often celebrate the success of underdogs in early rounds and decry the prevalence of unexciting finals such a pattern might be just a statistical illusion there are many early round matches so some upsets are inevitable and there is only one final so it is unlikely to be the most exciting match of the tournament in this article we consider instead whether the pattern might have a real foundation in the strategic allocation of effort by tournament participants we analyze a two round tournament in which a favorite and underdog play in each of the two semifinals and then one player from each match advances to the final victory in a match is probabilistic in that the chance of winning is increasing in each player s relative quality and in his relative effort expenditure 1 each player has a fixed amount of effort to exert over the two rounds unused effort is of no value and the only payoff is from winning the tournament to maximize the chance of winning each player must balance out the benefits of expending more effort in the semifinal against the opportunity cost of having less effort available for the final favorites and underdogs both have an incentive to conserve resources for the final but the trade offs they face are different a favorite plays a weak opponent in the semifinal but is likely to face a tough opponent in the final so it has a strong incentive to hold back conversely an underdog already plays a tough opponent in the semifinal so it has less incentive to conserve effort for the final 2 because of these different incentives we find that in any symmetric nash equilibrium underdogs exert more effort than favorites do in the semifinal the extra effort does not fully compensate for lower ability and underdogs are still likely to lose but the chance of an upset rises in the final round each player expends all its remaining resources so differences in abilities are no longer compressed by strategic considerations instead an underdog who makes it to the final has fewer resources left to spend than the favorite so differences in abilities are amplified and the chance of a blowout by the favorite rises if a favorite loses to an underdog in the early rounds it is often accused of looking past the underdog to its next match even if a player s strategy is optimal ex ante it might turn out to be unsuccessful ex post so such criticism is often unfair our results imply that it is rational for the favorite to hold back on resources in the semifinal even if it correctly anticipates that in equilibrium the underdog will be playing harder sometimes the strategy will backfire but on average the favorite benefits from being in a better position for the final these results are derived using a standard contest model in which each player s probability of victory in a match is a strictly increasing function of his ability and effort 3 such models were first developed to analyze rent seeking tullock 1967 1980 and similar models appear in a wide variety of areas including patent races loury 1979 election campaigns snyder 1989 compensation schemes nalebuff and stiglitz 1983 career ladders lazear and rosen 1981 lobbying baye et al 1993 and sports contests szymanski 2003 4 more specifically we model the contest as a sequential elimination ladder tournament in which players first compete in separate groups and the winners then compete against each other rosen 1986 our result that underdogs do indeed try harder than favorites in the semifinals contrasts with that of rosen 1986 p 707 8 because the favorite has a better chance of victory in the final rosen finds that winning a semifinal match is more valuable to the favorite so the favorite tries harder than the underdog we reach the opposite conclusion because we assume that there is a fixed supply of effort to be used across rounds and unused effort in the tournament has no value

incentives and problem uncertainty in innovation contests an empirical analysis contests are a historically important and increasingly popular mechanism for encouraging innovation a central concern in designing innovation contests is how many competitors to admit using a unique data set of 9 661 software contests we provide evidence of two coexisting and opposing forces that operate when the number of competitors increases greater rivalry reduces the incentives of all competitors in a contest to exert effort and make investments at the same time adding competitors increases the likelihood that at least one competitor will find an extreme value solution we show that the effort reducing effect of greater rivalry dominates for less uncertain problems whereas the effect on the extreme value prevails for more uncertain problems adding competitors thus systematically increases overall contest performance for high uncertainty problems we also find that higher uncertainty reduces the negative effect of added competitors on incentives thus uncertainty and the nature of the problem should be explicitly considered in the design of innovation tournaments we explore the implications of our findings for the theory and practice of innovation contests this paper was accepted by christian terwiesch operations management

payment cost minimization auction for deregulated electricity markets using surrogate optimization deregulated electricity markets use an auction mechanism to select offers and their power levels for energy and ancillary services a settlement mechanism is then used to determine the payments resulting from the selected offers currently most independent system operators isos in the united states use an auction mechanism that minimizes the total offer costs but determine payment costs using a settlement mechanism that pays uniform market clearing prices mcps to all selected offers under this setup the auction and settlement mechanisms are inconsistent since minimized costs are different from payment costs illustrative examples in the literature have shown that for a given set of offers if an auction mechanism that directly minimizes the payment costs is used then payment costs can be significantly reduced as compared to minimizing offer costs this observation has led to discussions among stakeholders and policymakers in the electricity markets as to which of the two auction mechanisms is more appropriate for isos to use while methods for minimizing offer costs abound limited approaches for minimization of payment costs have been reported this paper presents an effective method for directly minimizing payment costs in view of the specific features of the problem including the nonseparability of its objective function the discontinuity of offer curves and the maximum term in defining mcps our key idea is to use augmented lagrangian relaxation and to form and solve offer and mcp subproblems by using the surrogate optimization framework numerical testing results demonstrate that the method is effective and the resulting payment costs are significantly lower than what are obtained by minimizing the offer costs for a given set of offers

rent risk and replication preference adaptation in winner take all markets abstract we study the evolution of an economy where agents who are heterogeneous with respect to risk attitudes can either earn a certain income or enter a risky rent seeking contest we assume that agents behave rationally given their preferences but that the population distribution of preferences evolves over time in response to material payoffs we show that in particular initial distributions with full support converge to stationary states where all types are still present although rents are perfectly dissipated in material terms at a steady state efficiency is greater than if everybody had been risk neutral since risk lovers specialize in rent seeking

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

strategic investment with asymmetric spillovers this paper investigates the implications of asymmetric spillovers on noncooperative strategic investments in a duopoly with quadratic pay offs a unique equilibrium in the announcement of the leader follower role exists in the case where one firm absorbs large spillovers while the other at most is able to receive only small spillovers the leader in this equilibrium is the firm that absorbs the large spillovers other asymmetries in initial costs or efficiency in research and development do not affect this outcome

demand response in smart electricity grids equipped with renewable energy sources a review abstract dealing with renewable energy resources rers requires sophisticated planning and operation scheduling along with state of art technologies among many possible ways for handling rers demand response dr is investigated in the current review because of every other year modifications in dr definition and classification announced by federal energy regulatory commission ferc the latest dr definition and classification are scrutinized in the present work moreover a complete benefit and cost assessment of dr is added in the paper measurement and evolution methods along with the effects of dr in electricity prices are discussed next comes dr literature review of the recent papers majorly published after 2008 eventually successful dr implementations around the world are analyzed

pool strategy of a price maker wind power producer we consider the problem of a wind power producer trading energy in short term electricity markets the producer is a price taker in the day ahead market but a price maker in the balancing market and aims at optimizing its expected revenues from these market floors the problem is formulated as a mathematical program with equilibrium constraints mpec and cast as a mixed integer linear program milp which can be solved employing off the shelf optimization software the optimal bid is shown to deliver significantly improved performance compared to traditional bids such as the conditional mean or median forecast of wind power distribution finally sensitivity analyses are carried out to assess the impact on the offering strategy of the producer s penetration in the market of the correlation between wind power production and residual system deviation and of the shape of the forecast distribution of wind power production

agent based modeling in electrical energy markets using dynamic bayesian networks due to uncertainties in generation and load optimal decision making in electrical energy markets is a complicated and challenging task participating agents in the market have to estimate optimal bidding strategies based on incomplete public information and private assessment of the future state of the market to maximize their expected profit at different time scales in this paper we present an agent based model to address the problem of short term strategic bidding of conventional generation companies gencos in a power pool based on the proposed model each genco agent develops a private probabilistic model of the market using dynamic bayesian networks employs an online learning algorithm to train the model sparse bayesian learning and infers the future state of the market to estimate the optimal bidding function we show that by using this multiagent framework the agents will be able to predict and adapt to approximate nash equilibrium of the market through time using local reasoning and incomplete publicly available data the model is implemented in matlab and is tested on four test case systems two generic systems with 5 and 15 genco agents and two ieee benchmarks 9 bus and 30 bus systems both the day ahead da and hour ahead ha bidding schemes are implemented the results show a drop in market power in the 15 agent system compared to 5 agent system along with a pareto superior equilibrium in the ha scheme compared to the da scheme which corroborates the validity of the proposed decision making model also the simulations show that introduction of an ha decision making stage as an uncertainty containment tool leads to a more stable and less volatile price signal in the market which consequently results in flatter and improved profit curves for the gencos

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

tournament rewards and risk taking this article considers a lazear rosen tournament model where agents can influence both the spread of their output distribution risk taking and its mean the unique equilibrium induces excessive risk taking and a low level of effort by modifying the tournament to give the highest prize to the agent with the most moderate output a low level of risk taking and high level of effort can be sustained as an equilibrium the first result can be useful to understand the relative performance evaluation puzzle of executive compensation and the second result can be useful to understand puzzling workplace norms promoting mediocrity

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

economies of scope and scale in green advocacy environmental advocacy is a large and growing activity whilst a number of economists have analysed the advocacy process no systematic attempt has been made to understand the factors influencing the organisation of the sector we explore the relationship between economies of scale and scope in advocacy under the most popular specification of a tullock type contest economies of scope arise when and only when the scale of that activity is sufficiently large the incentives for merger are socially efficient implying no need for policy intervention

risk taking in selection contests abstract we study contests where the strategic variable is the degree of risk taking rather than the amount of effort the selection efficiency of such contests is examined we show that the selection efficiency of a contest may be improved by limiting the competition in two ways by having a small number of contestants and by restricting contestant quality

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

stochastic multiobjective market clearing of joint energy and reserves auctions ensuring power system security in this paper a stochastic multiobjective framework is proposed for day ahead joint market clearing the proposed multiobjective framework can concurrently optimize competing objective functions including augmented generation offer cost and security indices overload index voltage drop index and voltage stability margin besides system uncertainties including generating units and branches contingencies and load uncertainty are explicitly considered in the stochastic market clearing scheme the solution methodology consists of two stages which firstly employs roulette wheel mechanism and monte carlo simulation mcs for random adaptive 24 h scenario generation wherein the stochastic multiobjective market clearing procedure is converted into its respective deterministic equivalents scenarios in the second stage for each deterministic scenario a multiobjective mathematical programming mmp formulation based on the epsiv constrained approach is implemented for provision of spinning reserve sr and nonspinning reserve nsr as well as energy the mmp formulation of the market clearing process is optimized while meeting ac power flow constraints and expected interruption cost eic the ieee 24 bus reliability test system rts 24 bus is used to demonstrate the performance of the proposed method

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

endogenous timing in general rent seeking and conflict models we examine simultaneous versus sequential choice of effort in a two player contest the timing of moves determined in a preplay stage prior to the contest subgame as well as the value of the prize is allowed to be endogenous contrary to endogenous timing models with an exogenously fixed prize the present paper finds the following 1 players may decide to choose their effort simultaneously in the subgame perfect equilibrium spe of the extended game 2 the spe does not need to be unique in particular there is no unique spe with sequential moves if the direct costs of effort are zero 3 symmetry among players does not rule out incentives for precommitment to effort locally away from the cournot nash level 4 finally there may be no correlation between win probability and strategic incentives in our framework a finding most central in the analysis of fixed prize contests