the litigious plaintiff hypothesis case selection and resolution the process through which cases are selected for litigation cannot be ignored because it yields a set of lawsuits and plaintiffs that is far from a random selection either of potential claims or of potential claimants we present a theoretical framework for understanding the operation of this suit selection process and its relationship to the underlying distribution of potential claims and claimants the model has implications for the trial rate and the plaintiff win rate at trial our empirical analysis using data on over 200 000 federal civil litigations yields results that are strongly consistent with the theory

risk aversion in contests in a contest participants spend money or effort to increase their chances of winning a prize the authors examine primarily the following question could the timid the more risk averse have a better chance of winning in contests under limited liability the answer is always positive in the absence of limited liability there is no single answer whereas when the prize is shared as a function of effort the outcome is independent of the contestants risk aversion the authors also relate their results to self protection and examine some other implications of risk aversion copyright 1995 by royal economic society

international institutions and the volatility of international trade during the past half century states have established a large number of international trade institutions both multilateral and regional in scope the existing literature on this topic emphasizes that these agreements are chiefly designed to liberalize and increase the flow of overseas commerce yet such institutions have another function that has been largely ignored by researchers namely reducing volatility in trade policy and trade flows exposure to global markets increases the vulnerability of a country s output to terms of trade shocks governments seek to insulate their economies from such instability through membership in international trade institutions particularly the world trade organization wto and preferential trading arrangements ptas we hypothesize that these institutions reduce the volatility of overseas commerce we further hypothesize that because market actors prefer price stability trade institutions increase the volume of foreign commerce by reducing trade variability this article conducts the first large scale multivariate statistical tests of these two hypotheses using annual data on exports for all pairs of countries from 1951 through 2001 the tests provide strong support for our arguments ptas and the wto regime significantly reduce export volatility in so doing these institutions also increase export levels

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

truth effort and the legal battle in lawsuits relative success depends upon two main factors the true degree of fault and the efforts invested on eachside a proposed litigation success function displays thisdependence while satisfying other essential properties undertwo different protocols nash cournot and stackelberg solutions are obtained for the litigation efforts proportionate success and values of the lawsuit on each side outcomes are evaluated in terms of two normative criteria i achieving justice interpreted as equality between defendantfault and relative plaintiff success and ii minimizingaggregate litigation cost achievement of these aims isdetermined by the decisiveness of litigation effort relativeto true fault

modelling the joint determination of household labour supplies and commodity demands in addition to choosing the allocation of total expenditure between commodities households may also be able to make decisions over the allocation of their time between market work and leisure in both theoretical and empirical work it has often been the case that these decisions have been analysed separately in this paper we stress the theoretical attractions of considering the joint determination of the allocation of time between work and leisure and the allocation of total expenditure between commodities in a utility maximising framework using a sample of individual households we attempt to evaluate the empirical importance of the joint determination model over the separate determination of labour supplies and commodity demands our approach follows that of abbott and ashenfelter i976 phlips i978 barnett i979 deaton and muellbauer i980 and atkinson and stern i980 here we pay particular attention to the following four important aspects of household decision making over commodity demand and labour supply the first concerns the commonly assumed restriction on the household s preferences of weak separability between goods and leisure this assumption allows the estimation of commodity demand systems and engel curves that exclude wage rate variables in cross section household budget data with large variation in wage rates across the sample the invalidity of this assumption would involve a serious mis specification any correlation between the excluded wage variable and the included price income and demographic variables would lead to biased parameter estimates and hence biased estimated elasticities similarly this assumption allows the estimation of labour supply curves that exclude relative price variables and its invalidity could produce biased labour supply elasticities a second aspect of household decision making which we wish to highlight arises from the suspicion commonly alluded to in labour economics texts that primary male workers may not be free to choose their hours of work thus we estimate a matched pair of rationed and unrationed systems following the work of neary and roberts i 980 and deaton and muellbauer i 979 the separability restriction is not unrelated to this point since without it we will see that the rationed hours of work enter demand systems in a complex fashion in effect

privately informed seekers of an uncertain rent two departures from antecedent rent seeking models are invoked a rent of unknown size is sought and rent seekers obtain private imperfect estimates of this size a symmetric equilibrium for a fixed number of rent seekers is characterized and shown to underdissipate the rent then a model of the decision to obtain private information and participate in the rent seeking contest is built the symmetric equilibrium participation probability equates expected profit to participation costs a simple formula for underdissipation results dissipation is incomplete pre cisely by the expected aggregate participation costs if an award mechanism can attain a lower level of dissipation for a fixed number of seekers then it will raise the endogenous probability of partici pation and as a result will dissipate less rent in the equilibrium with an endogenous number of seekers

imperfect patent protection and innovation the paper studies the effect of strengthening protection on r d incentives in the context of process innovation it shows that for non drastic innovations that do not render the pre existing technology obsolete the innovator might favor imitation if the expected royalty rate determined by the court is sufficiently high since imitation is discouraged for very high levels of patent protection r d investment is maximized for an intermediate level of patent strength this finding provides a theoretical explanation for emerging empirical evidence questioning the effectiveness of strengthening protection on innovation incentives it also serves as a justification for the imperfections of the existing patent system that allows for some infringement

efficient rents 2 free entry and efficient rent seeking in the competition for a monopoly right in which the number of bidders is fixed tullock and others have found the value of the resources spent in the aggregate to capture the transfer to be sometimes less than and sometimes greater than the value of the monopoly we think this approach to be incomplete since it leaves unanswered the question of what determines the number of individuals who will vie for the right to be the monopolist it is unsatisfactory to imagine for example that the franchisor sets the number of contestants one could then foresee that rent seeking would arise to influence the permissible number of bidders and this merely moves the rent seeking dissipation question one step back

indices of household welfare and the value of leisure time i introduction a true leisure inclusive welfare index indicates the compensatory change in wage rates goods consumption or nonlabor income required to enable the household to attain some reference period utility given an exogenous change in wage rates and prices although these indices are theoretical constructs for the measurement of individual or household welfare changes empirical analyses of these indices have relied upon aggregate time series data these data provide information on national average changes in wage rates goods consumption and hours worked but do not capture changes in hours worked at the household level due to increased labor market participation while the entry of many new part time workers into the labor market may decrease the national average of hours worked per week there may be a decrease in leisure for many households in addition the aggregate time series approach ignores differences across households in demographic attributes and the occupations and industries in which household members are employed to address these issues two large cross sections of household data the 1972 and 1980 bls consumer expenditure surveys u s bureau of labor statistics 1978 were used to calculate three types of leisure inclusive welfare indices the real wage index goods consumption and nonlabor income indices for each of six household demographic groups households comprising a husband and wife with zero or more dependent non working children were considered as the basic decisionmaking units in this household approach two real wage indices could be constructed that of the husband and that of the wife since the labor services of the two individuals may be valued differently the remainder of the paper is organized as follows in section ii the leisure inclusive welfare indices are developed theoretically the fixed weight bounds on the true indices and the limitations of these indices in the context of a more general but as yet undeveloped intertemporal behavior framework is discussed in section iii the data and empirical results are discussed and analyzed a summary and conclusions follow in section iv along with suggestions for future research

measuring the cost of shelter for homeowners theoretical and empirical considerations recent economic developments have aroused substantial interest in the treatment in the consumer price index cpi of the cost of shelter for homeowners from december 1977 when the latest version of the cpi was introduced until december 1980 the all items cpi increased at an average annual rate of 11 6 while the homeownership component increased at an average annual rate of 16 2 relative to all of the other goods and services in the cpi the homeownership component has increased by 17 5 over the same time period if the relative price of homeownership had remained constant the growth rate of the cpi would have been reduced to 10 1 the question which has been raised is whether the rapid relative increase in the homeownership component which has had such an important impact on the cpi truly reflects changes in the cost of shelter this question is not only important but difficult encompassing many subsidiary questions and auxiliary issues the purposes of this paper are threefold 1 to outline briefly a conceptual framework for the cpi which leads to a straightforward specification of what the shelter component of the cpi should measure 2 to evaluate the theoretical properties of alternative procedures designed to approximate this measurement objective and 3 present empirical evidence on the operational difficulties involved in pursuing a new approach to shelter cost measurement two main conclusions are reached first on both theoretical and empirical grounds a rental equivalence approach to measuring shelter costs for owner occupants is preferred second an estimated rental equivalence measure has grown more slowly over at least the past six years than the official cpi homeownership component given the way in which the cpi is used to escalate both private and public expenditures these results demonstrate that the choice of measurement technique has important distributional implications

leadership turnover and the durability of international trade commitments under what conditions do states uphold their formal trade commitments while recent work focuses on the formation and design of trade agreements we know comparatively little about the durability of agreements over time we argue that government turnover undermines states commitments to liberalization even if they have already signed an international agreement meant to constrain their behavior we test this argument using data on realized trade in the presence of around 300 preferential trade agreements ptas since 1970 even in the presence of an international agreement ideological turnover is associated with increased political barriers to trade especially when the shift is toward left wing leaders these findings have important implications for our understanding of international cooperation if new leaders do not adhere to their predecessors commitments international agreements may not have lasting economic consequences

monotone comparative statics in games with non monotonic best replies contests and cournot oligopoly abstract in this paper we employ lattice theoretic techniques to derive a number of comparative statics in a logit contest a class of games for which best replies are generically non monotonic using the same approach we obtain several comparative statics in a cournot oligopoly model without imposing the usual assumptions that ensure the game is one of strategic substitutes our analysis illustrates how lattice theoretic techniques can deliver powerful insights in games with non monotonic best replies

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

marginal lobbying cost and the optimal amount of rent seeking in some ideal world in which information was free and the desire to promote the public interest prevailed the results developed in this paper would have no relevance the efficient amount of publicly provided goods and services would be known costlessly and the public interest motivation would assure that these quantities were provided in our less than ideal world however things are far different costly lobbying activities provide useful though incomplete information on the relative value of different public outlays but with private interest rather than public interest dominant this lobbying will also be used by special interests as a means of acquiring socially excessive quantities of government services

power politics and international trade r recent literature attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade we argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system namely their security externalities we consider these external effects explicitly doing so leads us to two conclusions 1 free trade is more likely within rather than across political military alliances and 2 alliances are more likely to evolve into free trade coalitions if they are embedded in bipolar systems than in multipolar systems using data drawn from an 80 year period beginning in 1905 we test these hypotheses the results of the analysis make it clear that alliances do have a direct statistically significant and large impact on bilateral trade flows and that this relationship is stronger in bipolar rather than in multipolar systems in the early 1970s students of international relations began what would become a long and heated debate about the political correlates of open international markets recently however an important element of consensus has begun to emerge most contributors to this debate now seem to agree that the prisoner s dilemma structure of state preferences with respect to trade explains the relative dearth of open international markets here we argue that what has become the standard prisoner s dilemma representation neglects the most critical aspect of free trade agreements in the anarchic international system namely their security externalities we consider these external effects explicitly in order to do so we construct and analyze a simple game theoretic model the results of this analysis demonstrate that tariff games between allies differ systematically from those played between actual or potential adversaries these differences imply that free trade is more likely within rather than across political military alliances however our analysis also suggests that the evolutionary prospects of alliances vary those that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts less credible exit threats and clearer responsibilities for alliance stability explain the advantage of a bipolar system we test this argument using data drawn from an 80 year period beginning in 1905 the empirical analysis supports our argument it demonstrates that alliances have a direct statistically significant and large effect upon bilateral trade moreover it shows that on average alliances have a much stronger effect on trade in a bipolar than in a multipolar world 2

free entry and efficient rent seeking this paper concerns rent seeking and the extent to which rents are dissipated under various circumstances gordon tullock s 1967 insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple harberger 1954 deadweight loss indeed under tullock s original formulation and in the extensions of his work by krueger 1974 and posner 1975 rents are exactly dissipated at the social level 1 is spent to capture 1 so that the total welfare loss from such activities is equal to the harberger triangle plus the rectangle of monopoly profits

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

the politics of foreign direct investment into developing countries increasing fdi through international trade agreements the flow of foreign direct investment into developing countries varies greatly across countries and over time the political factors that affect these flows are not well understood focusing on the relationship between trade and investment we argue that international trade agreements gatt wto and preferential trade agreements ptas provide mechanisms for making commitments to foreign investors about the treatment of their assets thus reassuring investors and increasing investment these international commitments are more credible than domestic policy choices because reneging on them is more costly statistical analyses for 122 developing countries from 1970 to 2000 support this argument developing countries that belong to the wto and participate in more ptas experience greater fdi inflows than otherwise controlling for many factors including domestic policy preferences and taking into account possible endogeneity joining international trade agreements allows developing countries to attract more fdi and thus increase economic growth

the impact of regulations on agricultural trade evidence from the sps and tbt agreements according to world trade organization rules countries may adopt regulations under the agreements on sanitary and phyto sanitary sps and technical barriers to trade tbt we analyze the structure of these measures in agricultural trade the inventory approach suggests that european countries have among the lowest coverage ratios of all oecd countries using a gravity equation we also estimate their stringency our results suggest that they significantly reduce developing countries exports to oecd countries but do not affect trade between oecd members furthermore european imports are more negatively influenced by sps and tbts than imports of other oecd countries

taxation of rent seeking activities we consider taxes on firms which engage in rent seeking contests the taxes can be on realized profits or on rent seeking expenditures the prize can be awarded to either the highest bidder or to a firm with probability proportional to its share of total spending on lobbying we find the conditions under which taxes do not reduce rent seeking effort generate tax revenue with no tax burden and cause no reduction in the profits of firms

deterrence in contests this paper explores the role of deterrence in contests as a general rule we show that for a deterrence strategy to be played by rational agents it is necessary that the contest be destructive we show for a very general class of functions that pure strategy deterrence equilibria where contestants deter one another do not exist a corollary of this finding is that under fairly general conditions agents should always be expected to engage in contests applied to international relations our results imply that war is always a potential outcome despite deterrence attempts

real wage indices this paper examines real wage measures that include leisure and nonlabor income in consumption decisions with respect to the advantages and disadvantages of partial versus complete welfare orderings and of utility based versus utility free wage indices in addition we argue that the usefulness of a real wage measure beyond welfare comparison has been ignored to test the robustness of utility based indices these real wage measures are calculated for two different utility function specifications the indirect addilog system and the linear expenditure system further comparisons are made against index bounds that are independent of the functional form for preferences

why democracies may actually be less reliable allies recent research builds on the observation that democracies have more durable alliances to argue that democracies make more reliable allies this need not be the case alliances serve as commitment devices adding ex ante credibility to states claims about ex post behavior variation in alliance durability must reflect differences in the desirability of formalizing alignments put simply democracies are most improved by formal commitments we offer two related explanations for why democracies might actually be less reliable alliance partners information costs for participating in policymaking and the advantages of organized interest groups combined with distributional incentives generated by the periodic turnover of governments may conspire to make informal commitments on the part of democracies problematic determining the net effect of democratic virtue and vice is best done empirically we test alliance reliability by focusing on intervention rather than on the duration or the number of commitments our results suggest that democracies make less reliable allies

transfer seeking and avoidance on the full social costs of rent seeking we would like to thank gordon tullock and an anonymous referee of this journal for their helpful comments and suggestions this abstract was borrowed from another version of this item

rent seeking contest when the prize increases with aggregate efforts the objective of this article is to investigate contests in which efforts are productive tullock s standard rent seeking model is extended by making the rent itself increase with the aggregate efforts a positive externality is thereby introduced into the contest because a contender s private effort in quest of the rent generates a benefit for other contenders coupled with a negative externality presented in the standard rent seeking model the net effect on the social efficiency of the contest is a priori ambiguous it is shown that the extended contest generates socially wasteful excessive aggregate efforts

the rational design of international institutions international institutions are central features of modern international relations this is true of trade international debt and financial restructuring and even national security once the exclusive realm of pure state action it was certainly true of the two major military engagements of the 1990s the wars in kosovo and the persian gulf as international institutions have gained prominence in the political landscape they have increasingly become prominent topics for study the sharpest debate among researchers has been theoretical do international institutions really matter missing from this debate is a sustained inquiry into how these institutions actually work we shift the focus by posing researchable questions about how they operate and how they relate to the problems states face we begin with a simple observation major institutions are organized in radically different ways some are global essentially open to all states others are regional with restricted memberships some institutions give each state an equal vote whereas others have weighted voting and sometimes require supermajorities institutions may have relatively strong central authorities and significant operating responsibilities or be little more than forums for consultation some arrangements for example most bilateral treaties have no formal organizational structure these are plentiful because states have a striking tendency to codify their relationships in formal legal arrangements why do these differences exist do they really matter both for members and for international politics more generally do they affect what the institutions themselves can do we focus on these large questions of institutional design

contests with multi tasking the standard contest model in which participants compete in a single dimension is well understood and documented multi dimension extensions are possible but are liable to increase the complexity of the contest structure mitigating one of its main advantages simplicity in this paper we propose an extension in which competition ensues in several dimensions and a competitor that wins a certain number of these is awarded a prize the amount of information needed to run the contest is hence limited to the number of dimensions won by each player we look at the design of this contest from the point of view of maximising effort in the contest per dimension and totally and show that there will be a tendency to run small contests with few dimensions the standard tullock model and its results are encompassed by our framework

the political economy of nontariff barriers a cross national analysis nontariff barriers to trade are most pervasive when deteriorating macroeconomic conditions give rise to demands for protection by pressure groups when countries are sufficiently large to give policymakers incentives to impose protection and when domestic institutions enhance the ability of public officials to act on these incentives statistical results based on a sample of advanced industrial countries during the 1980s support the argument that the incidence of nontariff barriers tends to be greatest when the preferences of pressure groups and policymakers converge more attention should be devoted to the interaction between societal and statist factors in cross national studies of trade policy

legal expenditure as a rent seeking game legal expenditures at a civil trial constitute an interesting type of rent seeking contest in civil litigation there is a natural interaction between the objective merits of the case and the outcome of the contest institutions such as fee shifting do not generally have a counterpart in other rent seeking contests the endogenous decision to participate in the rent seeking contest corresponds to the decision by the plaintiff to bring a case and the decision by the defendant to defend it the desirability of fee shifting is very sensitive to the value of the parameter which describes the legal technology

measuring protection mission impossible abstract there seems to be some confusion between openness and protection measures in the international trade literature the aim of this paper is to bring together the state of the art in quantifying trade policy measures and for this reason we focus on the extent of the protection granted by policies rather than on the degree of openness of the economy given the considerable amount of literature that deals with these issues we will limit our review as follows on the one hand we focus on trade policies implemented at the border and therefore do not consider all the other possible public interventions influencing trade flows on the other hand we only take into account indexes that explicitly adopt a metric expressed in a scalar aggregate tariff and quota equivalent measures or an index in a closed interval we distinguish between indexes that aggregate across products same barrier for more products and indexes that aggregate across instruments more barriers for the same product finally in order to classify the large number of indexes covered in our review we propose a typology based on three categories incidence outcome and equivalence

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

seeking rents by setting rents the political economy of rent seeking in recent years there has been a large number of papers on the subject of rent seeking most such works on rent seeking have taken the rent as exogenously determined by regulators regulators howeve r may also be expected and indeed have been shown to be rent seeke rs and hence the determination of the rent itself should be endogeniz ed to reflect the fact that the rent setters are themselves rent se ekers in this paper the authors do this by presenting an analysis o f the interaction of regulators firms and consumers within a rent s eeking framework where all three groups are assumed to be self motiva ted the analysis is carried out under alternative assumptions regard ing the nature of the market and the reaction functions of the partic ipants policy implications are drawn where appropriate copyright 1987 by royal economic society

does flexibility promote cooperation an application to the global trade regime do flexibility provisions in international agreements clauses allow ing for legal suspension of concessions without abrogating the treaty promote coop eration recent work emphasizes that provisions for relaxing treaty commitments can ironically make states more likely to form agreements and make deeper conces sions when doing so this argument has particularly been applied to the global trade regime the general agreement on tariffs and trade gatt and its successor the world trade organization wto yet the field has not produced much evidence bearing on this claim our article applies this claim to the global trade regime and its chief flexibility provision antidumping in contrast to prior work this article explic itly models the endogeneity and selection processes envisioned by the theory we find that states joining the wto are more likely to adopt domestic antidumping mech anisms likewise corrected for endogeneity states able to take advantage of the regime s principal flexibility provision by having a domestic antidumping mecha nism in place are significantly more likely to 1 join the wto 2 agree to more tightly binding tariff commitments and 3 implement lower applied tariffs as well

the number of rent seekers and aggregate rent seeking expenditures an unpleasant result i examine a rent seeking contest in which the winner gets a minimum rent but also gets an additional rent which is an increasing function of his lobbying expenditure i give real world examples of such rent seeking competitions contrary to the standard result in the rent seeking literature i obtain the perverse result that aggregate rent seeking expenditures may be inversely related to the number of rent seekers however i note that even if this result holds the cost of administering rent seeking competitions may imply that society is better off with fewer contenders than with an infinitely large number of contenders although the optimal number may not be the smallest number

the dynamics of pretrial negotiation it is shown that many cases proceed to court despite ample opportunity for interaction and much of the settlement takes place on the courthouse steps the deadline effect when fixed costs of bargaining are introduced a u shaped pattern of settlement appears with a greater chance of settlement at the beginning and at the end of negotiations than in the middle these characteristics persist even as the time between offers approaches zero the theoretical predictions are consistent with the stylized facts a large proportion of the lawsuits that are settled out of court are settled very close to the trial date or in the first several days of the trial 3 although the deadline effect appears in many other settings as well it has little theoretical support 4

what s yours is mine rent seeking and the common law the paper develops a rent seeking theory of the common law the general finding is that the law s form depends on thecomparative advantage each group has in production versusappropriation generally and appropriation via litigation inparticular the model generates new interpretations ofdevelopments in united states common law and is used both tosupplement and to criticize two dominant theories of such law the efficiency theory associated with the law and economicsmovement and that generated by critical legal studiesscholars

on the evolution of prize perceptions in contests abstract we apply an indirect evolutionary approach to players perceived prize valuations in contests evolution in finite populations leads to preferences that overstate the prize s material value and induce overexpenditure we establish an equivalence between evolutionarily stable strategies and the behavior induced by evolutionarily stable preferences

an all pay auction with a pure strategy equilibrium abstract i present an all pay auction where the valuations of the contestants is a function of their bids expenditures i show that there exists a unique nash equilibrium in pure strategies under certain conditions

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

estimating the parameters of a household production function with joint products by estimating the parameters of a production function whose inputs consist of family time and market goods the authors offer some new microeconomic estimates of the value of production that takes place in the home and also examine the concept of joint production that is the degree to which time devoted to home production simultaneously serves as leisure they find evidence of substantial jointness between home production time and leisure the degree of which is greater for wives than for husbands and that both husband and wife possess human capital skills more productive in market work than in home work

conflict and rent seeking success functions ratio vs difference models of relative success the rent seeking competitions studied by economists fall within a much broader category of conflict interactions that also includes military combats election campaigns industrial disputes lawsuits and sibling rivalries in the rent seeking literature each party s success pi which can be interpreted either as the probability of victory or as the proportion of the prize won has usually been taken to be a function of the ratio of the respective resource commitments alternatively however pi may instead be a function of the difference between the parties commitments to the contest the contest success function csf for the difference from is a logistic curve in which as is consistent with military experience increasing returns apply up to an inflection point at equal resource commitments a crucial flaw of the traditional ratio model is that neither onesided submission nor two sided peace between the parties can ever occur as a cournot equilibrium in contrast both of these outcomes are entirely consistent with a model in which success is a function of the difference between the parties resource commitments

on the merit of equal pay performance manipulation and incentive setting abstract work performance is often difficult to assess thus leaving room for manipulation of commonly used metrics we created a laboratory workplace in which we can precisely assess both work performance along with manipulation activities using two independent experiments we show that whenever pay for performance is used manipulation is pervasive leading to both a waste of organizational resources and a weakening of incentives by contrast paying organizational members equally effectively deters manipulation attempts leading to higher organizational production

the emperor has no clothes the limits of opec in the global oil market most scholars and policymakers believe opec can and does influence the price of oil by acting as a cartel this paper argues that most of the conventional wisdom about opec is wrong opec rarely if ever influences the oil production rate in its member states further opec has almost no lasting impact on world prices except under rare conditions there was one occasion on which opec did have a significant impact on world oil prices namely the 1973 oil crisis but opec s role in the event has been greatly misunderstood the circumstances of the crisis were highly exceptional making it unlikely that the organization could ever have a similar impact on world oil prices again this paper seeks to correct the misunderstanding about opec s role and replace it with a better understanding of the organization i argue that opec is dysfunctional as a cartel as it has little or no causal impact on its members choices about production levels or investment in production capacity opec s role is obscured in part by the complexity of the world oil market and in part by misdirection by policymakers especially within opec many scholars especially economists have argued that opec should be understood as a cartel designed to solve a prisoner s dilemma pd coordination game yet opec s persistence is better understood as a widespread failure to update beliefs about the organization a failure that is driven by information asymmetry and politics the fact that such a widespread belief about the world s most important commodity market could be wrong can help us better understand international regimes

efficient rent seeking under varying cost structures the rent seeking paradigm which was introduced by tullock 1967 has proven useful for exploring a variety of economic decisions that lie outside the traditional profit maximizing framework early applications of tullock s insight becker 1968 krueger 1974 posner 1975 demsetz 1976 foster 1981 and others usually assumed the entire value of the rent would be dissipated by competition following the fashion of economic profits in competitive markets in 1980 tullock structured a simple game reflecting the decisions made in rent seeking the results generated by his model suggest residual rents may accrue to rent seekers and under certain conditions resist dissipation a number of studies followed tullock s 1980 paper corcoran 1984 corcoran and karels 1985 higgins shugart and tollison 1985 tullock 1984 1985 and 1987 which explore the dissipation of excess rents under various assumptions

dynamic hours of work functions for husbands wives and single females hours of work equations are derived from the constrained maximization of a utility function that is not separable over time and that varies with a household s demographic structure these equations are fitted to observations on wage rates nonlabor income and other variables for husbands wives and unmarried women the dependence of each household s current work and consumption behavior upon its work and consumption behavior in the past is examined closely and different interpretations of the relationship are confronted with the data

the origins of human rights regimes democratic delegation in postwar europe the e ftieth anniversary of the un universal declaration on human rights marks an appropriate moment to reconsider the reasons why governments construct international regimes to adjudicate and enforce human rights such regimes include those established under the european convention for the protection of human rights and fundamental freedoms echr the inter american convention on human rights and the un covenant on civil and political rights these arrangements differ from most other forms of institutionalizedinternational cooperation in both their ends and their means unlike international institutions governing trade monetary environmental or security policy international human rights institutions are not designed primarily to regulate policy externalities arising from societal interactions across borders but to hold governments accountable for purely internal activities in contrast to most international regimes moreover human rights regimes are not generally enforced by interstate action although most arrangements formally empower governments to challenge one another such challenges almost never occur the distinctiveness of such regimes lies instead in their empowerment of individual citizens to bring suit to challenge the domestic activities of their own government independent courts and commissions attached to such regimes often respond to such individual claimsby judging that the applicationof domestic rules or legislationviolates international commitments even where such legislationhas been

the international politics of harmonization the case of capital market regulation the internationalization and globalization of capital markets greatly complicates the tasks of national financial regulators it is becoming increasingly difficult if not impossible to regulate the activities of banking and securities firms and the broad range of transactions in which they engage on a national level in this article i explore the process of international regulatory harmonization in capital markets focusing especially on the mechanisms political pressure market pressure and institutional arrangements that facilitate this process i argue that the united states and the united kingdom are dominant players in the capital market and that the factors most relevant for understanding harmonization processes are 1 whether other jurisdictions have incentives to emulate the regulatory innovations of the dominant financial centers and 2 whether the dominant centers experience negative externalities in the process these two factors shed considerable light on whether harmonization will be spurred primarily by market forces or by politics they also suggest the likely role of international institutions in the process of regulatory harmonization the argument is illustrated using four issue areas capital adequacy requirements for banks anti money laundering rules accounting standards and information sharing among securities regulators

conflict settlement and the shadow of the future abstract we examine a conflictual setting in which adversaries cannot contract on an enforcement variable arms and where the future strategic positions of adversaries are very different when there is open conflict than when there is settlement we show that as the future becomes more important in this setting open conflict becomes more likely than settlement we demonstrate the theoretical robustness of this finding and test it in a laboratory experiment as predicted we find that subjects are more likely to engage in destructive conflict as the future becomes more important

long run equilibrium and total expenditures in rent seeking a comment although corcoran is mathematically correct i believe his comment is not very helpful in order to discuss the matter in some detail the reader should consult table 7 1 from my original efficient rent seeking reproduced on page 92 1 this shows the equilibrium investment of each individual different numbers of individuals playing the game n and differing values of r table 7 2 also reproduced on page 93 shows the total investment

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

a generalized tullock contest we construct a generalized tullock contest under complete information where contingent upon winning or losing the payoff of a player is a linear function of prizes own effort and the effort of the rival this structure nests a number of existing contests in the literature and can be used to analyze new types of contests we characterize the unique symmetric equilibrium and show that small parameter modifications may lead to substantially different types of contests and hence different equilibrium effort levels

efficient rents 1 rent seeking behavior in the long run we have analyzed long run behavior in rent seeking under several conditions and behavioral hypotheses the question of interest is whether or not the long run expenditures will exactly equal the value of the rents our results depend on the type of competitive response which is assumed to exist in the long run and on the r value governing the probability of winning

a referendum on trade theory voting on free trade in costa rica research on mass opinion in international political economy overwhelmingly relies on survey data this poses problems of external validity especially for a frequently low salience issue such as trade policy to examine whether survey findings about attitudes toward economic openness apply outside of surveys this note considers patterns of voting in the 2007 costa rican plebiscite about joining the central american free trade area several extant theories appear to explain voting patterns but the results are less in line with traditional economic models based on locally important economic sectors

strategic decisions on lawyers compensation in civil disputes i introduction a plaintiff and a defendant usually bargain to settle a civil dispute when they cannot reach a settlement the case goes to trial naturally through the settlement and trial stages the litigants behave strategically a few researchers study such a situation by developing contest models 1 examples include plott 1987 katz 1988 farmer and pecorino 1999 wfirneryd 2000 and hirshleifer and osborne 2001 there exists however some discrepancy between the contest models and the mainstream articles in the law and economics literature the contest models deal with the legal battle itself to use the words of hirshleifer and osborne 2001 by contrast the mainstream articles focus on one or some of the important aspects of the negotiation and litigation process such as the likelihood of settlement the reasons for lawsuits the efficient levels of precautions the burden of proof the comparison of alternative fee shifting systems and the compensation for lawyers in the presence of an agency problem 2 this article attempts to reconcile the two strands a bit further to do so we develop a contest model in which the negotiation and litigation stages are combined as in the previous contest models but unlike the previous ones two lawyers one for a plaintiff and the other for a defendant are introduced using this contest model with delegation we are able to analyze some of the important issues in legal disputes for instance a plaintiffs lawyer in the united states routinely charges one third of the award if his client wins and nothing if his client loses a natural question which we can address using our model is then why the lawyer s contingent fee is not one half of the award nor two thirds but one third using our model we can also address the following issues does the plaintiff have an incentive to choose an hourly fee arrangement if feasible does delegation to the lawyers increase the total legal expenditure of the plaintiff and defendant compared with the case of no delegation why do a plaintiff and a defendant hire lawyers in litigation a straightforward reason for such delegation is that a litigant can benefit by hiring a lawyer who has more capacity than herself throughout the article we use she to refer to a litigant and he to refer to a lawyer another explanation is that a litigant can benefit by achieving strategic commitments through delegation specifically the litigant can change her opponent s behavior in her favor by using a lawyer whose objective function differs from hers baik and kim 1997 consider a contest model that carries both aspects of delegation for the first time in the delegation literature but the idea that strategic delegation benefits a main player has long been emphasized in many contexts examples include schelling 1960 fershtman and judd 1987 katz 1991 and warneryd 2000 this article extends the delegation model of baik and kim 1997 to the case where a plaintiffs lawyer works on a contingent fee basis but a defendant s lawyer on an hourly fee basis 3 we assume that the litigants and lawyers are risk neutral to be more precise our two stage game runs as follows in the first stage knowing that the defendant adopts the hourly fee the plaintiff determines the contingent fee fraction for her lawyer and announces it publicly in the second stage the lawyers exert their effort simultaneously and independently to win the lawsuit the plaintiff s lawyer chooses the effort level on his own but the effort level of the defendant s lawyer is chosen by the defendant the defendant has to incur a monitoring cost because she hires her lawyer under the hourly fee we use logit form probability of winning functions after solving for the subgame perfect equilibrium of the game we first derive the condition on relevant parameters under which delegation to the lawyers brings both litigants more payoffs compared with the case of no delegation

give peace a chance the effect of ownership and asymmetric information on peace abstract we study the possibility of peace when two countries fight a war over the ownership of a resource war is always the outcome of the game played by rational countries under complete or asymmetric information when there is no pre established distribution of the resource among countries when there is such a distribution of the resource under complete information peace is feasible for some initial distributions of the resource whereas under asymmetric information there are two classes of equilibria peaceful equilibria in which peace has a positive probability and aggressive equilibria which assign probability one to war surprisingly a little asymmetric information may yield war

the theory of real wage indices recently in this review john pencavel and p j lloyd have given insights into the measurement of real wages their work is an application of the concepts of true cost of living indices to a joint labor supply and commodity demand decision pencavel 1977 and lloyd 1979 offer several forms of real wage indices which are derived from explicit functional forms for utility this paper examines the theory of real wage indices in a more general setting and derives bounding indices which are independent of the functional form for utility

long run equilibrium and total expenditures in rent seeking the lure of excess profits or rents associated with monopoly power gives rise to expenditures to obtain these rents competitive rent seeking behavior is recognized as a factor which must be included among the wastes associated with monopoly power tullock 1967 posner 1975 1 the expenditures are aimed at transferring wealth rather than its creation and the use of resources to obtain this transfer is a loss to society how important rent seeking is as a part of the total monopolistic waste hinges on the size of the total expenditures induced by a given level of excess profits

distribution of surplus in sequential bargaining with endogenous recognition i examine a sequential bargaining situation in which agents contest the right to propose an allocation the contest can either take place at a pre bargaining stage yielding persistent recognition to propose or recur throughout the bargaining yielding transitory recognition equilibrium analysis reveals that surplus is distributed more unequally under persistent recognition social cost is higher under persistent recognition if and only if it attracts a sufficient number of active bargainers and individual s incentive to propose under transitory recognition may actually increase in the number of agents while this incentive always diminishes under persistent recognition

the divergent effects of joining international organizations trade gains and the rigors of wto accession governments have joined the world trade organization wto in vastly different ways some have taken mere days to join without undertaking any trade liberalization while others have taken more than a decade and been forced to undergo significant liberalization we argue that the more rigorous a state s accession to an international organization io and thus the greater policy change required to join the greater the benefits it will receive from membership in the organization in the trade context states facing greater scrutiny from the wto and thus engaging in greater trade liberalization as part of the wto accession process should experience greater trade on joining compared to those who face little scrutiny and engage in little if any liberalization we develop a three part classification of wto members based on type of accession early automatic and rigorous and then compile detailed original data on the accession experiences of each relevant state including length of time number of veto players rounds of questions and tariff and nontariff commitments results of exhaustive quantitative tests on all countries from 1950 to 2006 which are robust to estimator sample period and model specification choices consistently demonstrate that those who engage in the greatest amount of accession driven liberalization experience the greatest trade increases from wto membership particularly in the years right after joining in contrast those who do little or nothing to join do not see any trade gains from being a wto member these findings reconcile previous findings on the effects of wto membership on trade highlight the causal importance of io accession and illuminate the conditions under which ios will have beneficial effects for member states

who supports global economic engagement the sources of preferences in american foreign economic policy in this article we bring together opposing international relations theories to better understand u s foreign policy in particular foreign trade and aid using votes in the u s house of representatives from 1979 2004 we explore different theoretical predictions about preferences for foreign economic policy we assess the impact of domestic factors namely political economy and ideological preferences versus foreign policy pressures our three main results highlight the differential effect of these factors in the two issue areas first aid preferences are as affected by domestic political economy factors as are trade preferences second trade preferences but not economic aid ones are shaped by the president s foreign policy concerns for economic aid domestic political economy factors matter more than foreign policy ones third aid preferences are shaped more by ideological factors than are trade ones but ideology plays a different substantive role in each different constituencies support aid and trade this finding has implications for foreign policy substitutability the internationalist coalition in u s foreign policy statist theories of foreign policy and the connection between public opinion and legislative voting

why no backsliding the european union s impact on democracy and governance before and after accession this article documents and explains the puzzling lack of backsliding in political reforms among the new postcommunist eu members even though these countries are no longer subject to the powerful incentives of the eu membership promise using a combination of cross national statistics expert interviews and public opinion data the authors show that the new eu members have experienced at most a slowdown in reforms rather than a genuine backlash the authors attribute this finding to the fact that the loss of leverage after the countries joined the european union was balanced by a combination of alternative leverage and linkage mechanisms including greater dependence on eu aid and trade and greater exposure to the west for both elites and ordinary citizens for the latter expanded work and travel opportunities seem to be associated with higher expectations of government performance and greater political involvement which may be crucial for future governance reform in the region

on being asset constrained in litigation contests this paper establishes that being asset constrained may be advantageous for defendants in litigation contests an active asset constraint of defendants i may increase decrease defendant plaintiff contest effort ii may lower the sum of plaintiff and defendant contest effort iii lowers expected defendant payment and iv makes a symmetric contest asymmetric

free trade fair trade strategic trade and protectionism in the u s congress 1987 88 what conditions led the one hundredth congress of the united states to enact fair trade and strategic trade policies into law during 1987 88 political partisanship is an important force with democrats supporting and republicans opposing all types of trade intervention otherwise the coalitions of support for and opposition to the various trade policies differ particularly in the senate in that body international business is associated with support for fair trade policies and with opposition to classical protectionism while domestic u s business is associated with support for classical protectionism liberalism is strongly associated with support for fair and strategic trade policies but is not associated with classical protectionism in the house of representatives the long standing protectionist coalition remains an influence few forces in support of free trade remain in u s politics changing international market conditions rapidly affect the making of u s trade policy

comparative analysis of litigation systems an auction theoretic approach a simple auction theoretic framework is used to examine symmetric litigation environments where the legal ownership of a disputed asset is unknown to the court the court observes only the quality of the case presented by each party and awards the asset to the party presenting the best case rational litigants influence the quality of their cases by hiring skilful attorneys this framework permits us to compare the equilibrium legal expenditures that arise under a continuum of legal systems the british rule continental rule american rule and some recently proposed legal reforms are special cases of our model

contingent fees meet the british rule an exploratory study compensation schemes in which lawyer s fees are contingent on winning the suit are becoming increasingly popular throughout europe at the same time the british rule of legal cost allocation is applicable in many european countries as a result it is of policy relevance how their coexistence may be harmonized this paper uses the litigation contest framework to analyze the consequences of three different cost allocation regimes if a plaintiff s attorney is compensated on a contingent fee basis we compare the equilibrium contest effort justice and payoffs for affected parties in the different regimes and find arguments in favor of not reimbursing contingent fees

free to trade democracies autocracies and international trade trade relations we address this issue by analyzing the relationship between regime type and trade policy in a formal model of commercial policy we establish that the ratification responsibility of the legislature in democratic states leads pairs of democracies to set trade barriers at a lower level than mixed country pairs composed of an autocracy and a democracy we test this hypothesis by analyzing the effects of regime type on trade during the period from 1960 to 1990 the results of this analysis accord with our argument democratic pairs have had much more open trade relations than mixed pairs t he effects of domestic political institutions on trade policy have long been a source of controversy among social scientists despite the widespread interest that this debate has prompted however remarkably few studies have addressed the links between political regime type and commercial policy 1 most work on the political economy of trade policy that examines institutional factors focuses only on variations in policy among democracies and avoids comparing democracies with other types of regimes moreover many analyses of trade barriers especially those by economists ignore the effects of domestic political

do wto members have more liberal trade policy abstract this paper uses 68 measures of trade policy and liberalization to ask if membership in the world trade organization wto and its predecessor the general agreement on tariffs and trade gatt is associated with more liberal trade policy almost no measures of trade policy are significantly correlated with gatt wto membership trade liberalizations when they occur usually lag gatt entry by many years and the gatt wto often admits countries that are closed and remain closed for years the exception to the rule is that wto members tend to have slightly more freedom as judged by the heritage foundation s index