grand innovation prizes a theoretical normative and empirical evaluation abstract this paper provides a systematic examination of the use of a grand innovation prize gip in action the progressive automotive insurance x prize a 10 million prize for a highly efficient vehicle following a mechanism design approach we define three key dimensions for gip evaluation objectives design and performance where prize design includes ex ante specifications ex ante incentives qualification rules and award governance within this framework we compare observations of gips from three domains empirical reality theory and policy to better understand their function as an incentive mechanism for encouraging new solutions to large scale social challenges combining data from direct observation personal interviews and surveys together with analysis of extant theory and policy documents on gips our results highlight three points of divergence first over the complexity of defining prize specifications secondly over the nature and role of incentives particularly patents thirdly the overlooked challenges associated with prize governance our approach identifies a clear roadmap for future theory and policy around gips

rent seeking and rent dissipation a neutrality result abstract we consider rent seeking contests between at least two agents who might value the prize differently we capture a wide range of institutional aspects of contests by analyzing a class of contest success functions fulfilling several properties the main properties are anonymity and a condition on the elasticity of a rent seeker s win probability with respect to her effort we show the existence of a mixed strategy equilibrium and establish equilibrium payoffs in this equilibrium complete rent dissipation holds our results imply a partial robustness result for the all pay auction

economywide impacts of climate change on agriculture in sub saharan africa two possible adaptation scenarios to climate change for sub saharan africa are analyzed under the sres b2 scenario the first scenario doubles the irrigated area in sub saharan africa by 2050 compared to the baseline but keeps total crop area constant the second scenario increases both rainfed and irrigated crop yields by 25 for all sub saharan african countries the two adaptation scenarios are analyzed with impact a partial equilibrium agricultural sector model combined with a water simulation module and with gtap w a general equilibrium model including water resources the methodology combines the advantages of a partial equilibrium approach which considers detailed water agriculture linkages with a general equilibrium approach which takes into account linkages between agriculture and nonagricultural sectors and includes a full treatment of factor markets the efficacy of the two scenarios as adaptation measures to cope with climate change is discussed due to the limited initial irrigated area in the region an increase in agricultural productivity achieves better outcomes than an expansion of irrigated area even though sub saharan africa is not a key contributor to global food production rainfed irrigated or total both scenarios help lower world food prices stimulating national and international food markets

caps on political lobbying comment following the 1999 israeli elections the winning candidate s ehud barak s party was fined 3 2 million dollars for violating israel s campaign financing laws by exceeding the spending cap imposed and raising 1 2 million dollars illegally see time europe 2000 while adhering to the strict ncaa recruiting regulations the university of oregon spent 3 million dollars to make their football locker room the best anywhere including the nfl lexington herald leader 2003 when asked about the previous salary cap in the uk football league players said that it the cap was so artificial that clubs paid money in brown paper envelopes bbc2 newsnight 2002 in all these cases there officially existed a rigid spending cap however they show that even though a cap exists the cap might not be easily enforced when enforced the penalty may just be financial rather than a change in outcome the cap may be enforced and adhered to but there may also be alternate perhaps less effective hence more costly means of spending we also see that the flexible nature of the cap is often built into the rules by examining the salary caps of the four major us sports leagues where the caps are routinely exceeded in baseball and basketball surpassing the cap invokes a pure financial penalty called a luxury tax which is proportional to the excess in football while the cap is stated in terms of salaries many teams use signing bonuses as a way to circumvent it in ice hockey there is a dual cap system where the luxury tax is invoked on salaries falling between the two caps and signing bonuses are an allowed method to exceed the

uncertainty polarization and proposal incentives under quadratic voting we consider the quadratic voting mechanism lalley and weyl in quadratic voting working paper university of chicago 2015 weyl in the robustness of quadratic voting working paper university of chicago 2015 and focus on the incentives it provides individuals deciding what proposals or candidates to put up for a vote the incentive compatibility of quadratic voting rests upon the assumption that individuals value the money used to buy votes while the budget balance efficiency of the mechanism requires that the money spent by one voter by redistributed among the other voters from these assumptions we show that it follows that strategic proposers will have an incentive to offer proposals with greater uncertainty about individual values similarly we show that in an electoral setting quadratic voting provides an incentive to propose candidates with polarized non convergent platforms

contests with small noise and the robustness of the all pay auction this paper considers all pay contests in which the relationship between bids and allocations reflects a small amount of noise prior work had focused on one particular equilibrium however there may be other equilibria to address this issue we introduce a new and intuitive measure for the proximity to the all pay auction this allows in particular to provide simple conditions under which actually any equilibrium of the contest is both payoff equivalent and revenue equivalent to the unique equilibrium of the corresponding all pay auction the results are shown to have powerful implications for monopoly licensing political lobbying electoral competition optimally biased contests the empirical analysis of rent seeking and dynamic contests

the value of the high aswan dam to the egyptian economy the high aswan dam converted a variable and uncertain flow of nile river water into a predictable and controllable water supply stored in lake nasser we use a computable general equilibrium model of the egyptian economy to estimate the economic impact of the high aswan dam we compare the actual 1997 economy to the 1997 economy as it would have been if historical pre dam nile flows drawn from a 72 year portrait had applied i e the dam had not been built the steady water supply sustained by the high aswan dam increased transport productivity and year round availability of predictable and adequate water sustained a shift towards more valuable summer crops these static effects are worth egp 4 9 billion investments in transport and agriculture increased as a consequence these investments assuming that egypt is a small open economy added another egp 1 1 billion to the value of the dam the risk premium on the reduced variability is estimated to be egp 1 1 billion for a modest risk aversion and perhaps egp 4 4 billion for a high risk aversion the total gain of egp 7 1 billion to 10 3 egp billion equals 2 7 to 4 0 of annual gdp in 1997

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

favoritism in asymmetric contests head starts and handicaps abstract i examine a contest with identity dependent rules in which contestants are privately informed and ex ante heterogeneous a contestant may suffer from a handicap or benefit from a head start the former reduces the contestant s score by a fixed percentage the latter is an additive bonus although total effort increases if the weak contestant is favored with a head start the optimal use of handicaps is not as clear cut depending on the nature of the asymmetry it may or may not be optimal to handicap the strong contestant moreover it is generally optimal to combine the two instruments for instance when contestants are sufficiently heterogeneous the weak contestant should be given both a head start and a handicap it may also be possible to induce higher effort and at the same time make both contestants better off ex ante

integer game with delay in this note we study a version of a war of attrition in which the players pick delays and the player with the longest delay wins unlike the war of attrition all players have to experience the longest delay before the consumption takes place we show that the game has no mixed strategy nash equilibria the game can be seen as a re interpretation of the integer game which is one of the most important and most criticized constructions in the full implementation literature unlike the integer game it has a well defined best response against any mixed strategy

capital accumulation and economic growth the case of the retail food industry in developing countries the share of resources allocated to food marketed through supermarkets and their marketing channels has grown at an unprecedented rate in developing countries during the 1990s this expansion has caused some resources to depart traditional channels differences in the relative capital intensity of the modern marketing channels in contrast to the traditional channels is shown to explain at least part of this evolution as the process of economic growth and capital deepening even when the food share of total expenditures declines in this case incomplete markets and policy distortions can exacerbate the effects of adjustment in traditional agriculture placing a greater need

participation in deterministic contests abstract this paper considers participation in deterministic contests for m 1 identical prizes which employ an auction like rule to determine the winners in most papers that investigate such models participation by precisely m 1 players is associated with players having complete information about their opponents characteristics and participation by more than m 1 players is associated with players having incomplete information about their opponents characteristics i show that incomplete information is in fact neither sufficient nor necessary for participation by more than m 1 players

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

the optimal allocation of prizes in contests we study a contest with multiple not necessarily equal prizes contestants have private information about an ability parameter that affects their costs of bidding the contestant with the highest bid wins the first prize the contestant with the second highest bid wins the second prize and so on until all the prizes are allocated all contestants incur their respective costs of bidding the contest s designer maximizes the expected sum of bids our main results are 1 we display bidding equlibria for any number of contestants having linear convex or concave cost functions and for any distribution of abilities 2 if the cost functions are linear or concave then no matter what the distribution of abilities is it is optimal for the designer to allocate the entire prize sum to a single first prize 3 we give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function

how do markets manage water resources an experiment we experimentally test how a private monopoly a duopoly and a public utility allocate water of differing qualities to households and farmers most of our results are in line with the theoretical predictions overexploitation of the resources is observed independently of the market structure stock depletion for the public utility is the fastest followed by the private duopoly and private monopoly on the positive aspects of centralized public management we find that the average quality to price ratio offered by the public monopoly is substantially higher than that offered by the private monopoly or duopoly

implementing coordinated team play abstract this note studies a moral hazard model of joint production in which there are strong gains to coordination the mechanism we propose for resolving the tacit collusion problem that arises in our setting makes use of at will contracts which provide the agents with the option to quit at any time journal of economic literature classification numbers c72 d82

politician preferences law abiding lobbyists and caps on political contributions the effect of a contribution cap is analyzed in a political lobbying game where the politician has a policy preference in contrast to the previous literature without politician policy preferences more restrictive binding caps always reduce expected aggregate contributions however the initial imposition of a cap increases contributions if the politician mildly favors the low valuation lobbyist s policy the introduction of policy preferences permits analysis of monied interests policy influence a more restrictive cap makes it more likely that the politician enacts the policy he would have enacted in the absence of lobbying even in cases where expected aggregate contributions increase

water scarcity and the impact of improved irrigation management a computable general equilibrium analysis increasing water scarcity combined with an increasing demand for food and water for irrigation call for a careful revision of water use in agriculture currently less than 60 of all the water used for irrigation is effectively used by crops based on the new version of the gtap w model we analyze the effect of potential water savings and the welfare implications of improvements in irrigation efficiency worldwide the results show that a water policy directed to improve irrigation efficiency led to global and regional water savings but it is not beneficial for all regions the final effect on regional welfare will depend on the interaction of several different causes for instance higher irrigation efficiency changes opportunity costs and reverses comparative advantages modifying regional trade patterns and welfare for water stressed regions the effects on welfare are mostly positive for nonwater scarce regions the results are more mixed and mostly negative the results show that exports of virtual water are not exclusive of water abundant regions

the economics of water scarcity and variability does the availability or variability of water matter for the economy does it meaningfully impact the growth and development trajectory of a country it may seem surprising that answers to these most basic of questions remain elusive the aim of this paper is to summarize recent work on the economic impacts of water scarcity and variability the paper finds that there is strong evidence that variations in rainfall and water availability have significant impacts on particular sectors such as agriculture human capital and even conflict but paradoxically evidence of impacts on economic growth and other measures of aggregate economic activity remains ambiguous the paper explains reasons for this anomaly and explores the pathways through which water impacts the economy the paper provides a synthesis of key developments in the literature identifies methodological gaps and suggests policy solutions

all pay auctions with certain and uncertain prizes abstract we study all pay auctions with multiple prizes the players have the same value for all the certain prizes except for one uncertain prize for which each player has a private value we characterize the equilibrium strategy and show that independent of the ranking of the uncertain prize if the uncertain prize is not the lowest one a player s effort as well as his expected payoff increase in his value for the uncertain prize otherwise if this prize is the lowest one we obtain that a player s effort may decrease in his value for the uncertain prize but his expected utility increases

arms races and conflict experimental evidence we study escalation and aggression in an experimental first strike game in which two participants play multiple rounds of a money earning task in each round both players can spend money to accumulate weapons the player with more weapons can spend money to strike against the other player which almost totally eliminates the victim s earnings potential and removes their capacity to strike weapons can serve as a means of deterrence in four treatments we find that deterrence is strengthened if weapon stocking cannot be observed that a balance of power is effective in maintaining peace and that mutually beneficial trade decreases the risk of confrontation but not necessarily the likelihood of costly arms races

external shocks adjustment policies and investment in a developing economy illustrations from a forward looking cge model of the philippines abstract the rapid increase in investment and external debt of middle income countries like the philippines during the 1970s was perfectly rational given existing policies however these countries could have done better with an appropriate mix of adjustment policies using a dynamic general equilibrium framework the paper examines the sensitivity of investment and growth to external shocks and adjustment policies it highlights the intertemporal trade offs of tariff reform a policy often recommended in the 1980s emphasizing the need for complementary measures to ease macro imbalances and short term dislocations of the protected sector

two bidder all pay auctions with interdependent valuations including the highly competitive case abstract we analyze symmetric two bidder all pay auctions with interdependent valuations and discrete type spaces relaxing previous restrictions on the distribution of types and the valuation structure we present a construction that characterizes all symmetric equilibria we show how the search problem this construction faces can be complex in equilibrium randomization can take place over disjoint intervals of bids equilibrium supports can have a rich structure and non monotonicity of the equilibrium may result in a positive probability of allocative inefficiency when the value of the prize is not common particular attention is paid to the case in which an increase in a bidder s posterior expected value of winning the auction is likely to be accompanied by a corresponding increase for the other bidder such environments are highly competitive in the sense that the bidder s higher valuation also signals that the other bidder has an incentive to bid aggressively

incentives and careers in academia theory and empirical analysis we study career concerns in italian academia we mould our empirical analysis on the standard model of contests formalised in the multi unit all pay auction the number of posts the number of app

competitive effect of cross shareholdings in all pay auctions with complete information abstract this paper investigates the competitive effect of cross shareholdings in winner take all all pay auctions with two asymmetric bidders we show that cross shareholdings may paradoxically create a pro competitive effect and elicit more effort than a standard contest without cross ownership this observation runs in contrast to the anti competitive effect that cross shareholdings usually create in standard oligopolistic settings such as cournot or bertrand competitions both bidding costs and the sizes of cross shares affect the resultant total effort non monotonically neither a cross share nor a higher bidding cost necessarily decreases effort supply a complete account of equilibrium bidding behaviors is provided and the necessary and sufficient conditions under which cross shareholdings lead to higher or lower levels of overall effort are identified however the pro competitive effect comes at a loss of efficiency

seigniorage operating rules and the high inflation trap there may be both a high and a low inflation equilibrium when the government finances the deficit through seigniorage under rational expectations the high inflation equilibrium is stable and the low inflation equilibrium unstable under adaptive expectations or lagged adjustment of money balances with rational expectations the low inflation equilibrium may be stable adding bond financing dual equilibria remain if the government fixes the real interest rate but a unique equilibrium is attained when the government sets a nominal anchor for the economy the existence of dual equilibria is thus a result of the government s operating rules

water markets and third party effects we examine potential third party effects arising from trading water from one region rural to another urban using labor water and heterogeneous land rural agents produce a traded agricultural good and nontraded service good absent job market frictions increased water trading improves per capita regional welfare but aggregate service income can increase decrease while individual land rents decrease increase if labor experiences job market frictions water trading can trigger socially inefficient land fallowing and a decrease in per capita regional welfare simulation results confirm the no job market friction model predictions

the optimal prize structure of symmetric tullock contests we show that the optimal prize structure of symmetric n player tullock tournaments assigns the entire prize pool to the winner provided that a symmetric pure strategy equilibrium exists if such an equilibrium fails to exist under the winner take all structure we construct the optimal prize structure which improves existence conditions by dampening efforts if no such optimal equilibrium exists no symmetric pure strategy equilibrium induces positive efforts

asymmetric contests with conditional investments rent seeking scenarios competitions for promotions and research and development r d races are examples of competitions in which participants expend resources regardless of whether they win or lose although similar in their all pay feature such competitions often differ in important dimensions these include the type of technologies employed in competition the type of asymmetries among competitors the degree to which expenditures are sunk and the number of prizes consider lobbying settings in which firms expend resources in order to influence a policymaker if expenditures take the form of monetary outlays and all firms have the same cost of capital then it is reasonable to think of firms marginal cost of influence as linear but if a firm has a reputational advantage and high costs of capital its lobbying technology may be more reasonably thought of as having convex costs relatively low marginal costs up to a moderate level of influence due to the reputational advantage and relatively high marginal costs at higher levels of influence due to the high costs of capital similarly the lobbying technology of a firm that is relatively unknown and has low costs of capital may be characterized by concave costs lobbying restrictions geographic location or preferential treatment by the policymaker further impact firms lobbying technologies inducing additional nonlinearities and asymmetries among firms in some lobbying settings firms also commit to expenditures conditional on a favorable outcome for example a firm may commit to building factories and creating new jobs if it is granted one of a limited number of manufacturing licenses thus the specification of firms lobbying technologies the type of asymmetries among firms the combination of unconditional and conditional investments and the number of eventual winners may change according to the lobbying setting studied the same is true for other competitions with an all pay feature in a competition for promotions workers often differ in their abilities experience and social skills more than one prize

water markets design and evidence from experimental economics market mechanisms are gaining increasing acceptance all over the world as a way of making more efficient use of scarce water resources designing regulatory frameworks that ensure both inter and intra temporal efficient allocations is a daunting task especially if supply is stochastic and there is ample storage capacity in addition to defining tradable rights specific provisions must regulate the use of reservoirs commonly water statutes include provisions that establish asymmetries regarding the allocation of water and market restrictions that ban water trading across different users in this article we use data collected in a laboratory to test two specific market regulations included in the 1999 water reform in spain first junior right holders are not allowed to buy water from senior users second the law does not explicitly define water rights over units left in reservoirs for the following season results suggest that trading restrictions among water right holders lead to welfare losses for senior users it is shown that removing this restriction would increase senior right holders benefits without reducing those of junior users results show that defining water rights over saved units across periods would increase the average stock levels of reservoirs and reduce market price instability the lessons learned from the spanish experience are applicable to settings characterized by unstable natural water supply and the availability of large storage facilities

on turkey s trade policy is a customs union with europe enough abstract turkey has decided to harmonize its tarification structure with that of the european union for the country s authorities this move to a customs union is only meant to be the first step toward integration in the european union there are signs however that political opposition to the government s procompetitive stance may be strong enough to block any further move toward fuller trade liberalization we show using applied intertemporal ge analysis that to be welfare improving the trade reform would have to be pursued further and nontariff barriers on european trade removed failure to do so could be more detrimental to domestic welfare than no reform at all

discrimination in a model of contests with incomplete information about ability we study contests with private information and identical contestants where contestants efforts and innate abilities generate output of varying qualities the designer s revenue depends on the quality of the output and she offers a reward to the contestant achieving the highest quality we characterize the equilibrium behavior outcomes and payoffs for both nondiscriminatory and discriminatory where the reward is contestant dependent contests we derive conditions under which the designer obtains a larger payoff when using a discriminatory contest and describe settings where these conditions are satisfied

correlated equilibrium as an expression of bayesian rationality if it is common knowledge that the players in a game are bayesian utility maximizers who treat uncertainty about other players actions like any other uncertainty then the outcome is necessarily a correlated equilibrium random strategies appear as an expression of each player s uncertainty about what the others will do not as the result of willful randomization use is made of the common prior assumption according to which differences in probability assessments by different individuals are due to the different information that they have where information may be interpreted broadly to include experience upbringing and genetic makeup copyright 1987 by the econometric society

tie breaks and bid caps in all pay auctions we revisit the complete information all pay auction with bid caps introduced by che and gale 1998 dropping their assumption that tie breaking must be symmetric any choice of tie breaking rule leads to a dierent set of nash equilibria compared to the optimal bid cap of che and gale we obtain that in order to maximize the sum of bids the designer prefers to set a less restrictive bid cap combined with a tie breaking rule which slightly favors the weaker bidder moreover the designer is better o breaking ties deterministically in favor of the weak bidder than symmetrically except when bidding costs are strongly convex jel classication d72 d44

democracy undone systematic minority advantage in competitive vote markets we study the competitive equilibrium of a market for votes where the choice is binary and it is known that a majority of the voters supports one of the two alternatives voters can trade votes for a numeraire before making a decision via majority rule we identify a sufficient condition guaranteeing the existence of an ex ante equilibrium in equilibrium only the most intense voter on each side demands votes and each demands enough votes to alone control a majority the equilibrium strongly resembles an all pay auction for decision power it makes clear that votes are only a medium for the allocation of power the probability of a minority victory is always higher than efficient and converges rapidly to one half as the electorate increases for any minority size the numerical advantage of the majority becomes irrelevant democracy is undone by the market

does the real interest parity hypothesis hold evidence for developed and emerging markets we present empirical evidence on the real interest parity hypothesis for a set of emerging and developed countries this is done by carrying out a set of unit root tests on the real interest differentials with respect to the us our results support the hypothesis of a rapid reversion towards a zero differential for developed countries and towards a positive one for emerging markets mean reversion is faster for emerging market economies we also find that this adjustment tends to be highly asymmetric and markedly different for developed and emerging markets our evidence reveals a high degree of market integration for developed countries and highlights the importance of risk premia for emerging markets

optimal design of research contests procurement of an innovation often requires substantial effort by potential suppliers motivating effort may be difficult if the level of effort and quality of the resulting innovation are unverifiable if innovators cannot benefit directly by marketing their innovations and if the buyer cannot extract up front payments from suppliers we study the use of contests to procure an innovation in such an environment an auction in which two suppliers are invited to innovate and then bid their prizes is optimal in a large class of contests if contestants are asymmetric it is optimal to handicap the most efficient one

a tug of war team contest this paper analyzes a tug of war contest between two teams in each round of the tug of war a pair of agents from the opposing teams competes in a private value all pay auction with asymmetric value distributions and effort effectiveness whichever team arrives first at a given lead in terms of battle victories over the opponent wins the tug of war there exists a unique markov perfect equilibrium in bidding strategies which depend on the respective player s valuation and the current state of the tug of war we derive rich comparative statics for this equilibrium by using the fact that the state of the tug of war evolves according to a time homogeneous absorbing markov chain

trial and settlement a study of high low agreements this paper presents the first systematic theoretical and empirical study of high low agreements in civil litigation a high low agreement is a private contract that if signed by litigants before the conclusion of a trial constrains the future damages payment to lie between a minimum and a maximum amount whereas the existing literature describes litigation as a choice between trial and settlement our examination of high low agreements a relatively new phenomenon in civil litigation introduces partial or incomplete settlements in our theoretical model trial is both costly and risky when litigants have divergent subjective beliefs and are mutually optimistic about their trial prospects cases may fail to settle in these cases high low agreements can be in the litigants mutual interest because they limit the risk of outlier damages awards while still allowing for an optimal degree of speculation using unique insurance claims data from a national insurance company we describe the features of these agreements and empirically investigate the factors that may influence whether litigants discuss or enter into high low agreements our empirical findings are consistent with the predictions of the theoretical model we also explore extensions and alternative explanations for high low agreements including their use to mitigate excessive offsetting trial expenditures

the welfare impact of self supplied water pricing in canada a computable general equilibrium assessment this paper uses a computable general equilibrium model to assess the welfare cost of changing the method of water allocation in canada towards one that uses prices to ration demand we model the introduction of a price on both water that is abstracted as well as water that is consumed that is abstracted and not returned to the source we estimate that reducing water consumption by 25 would require imposition of a price on water consumption of around 0 21 text m 3 similarly introduction of a water abstraction charge of about 0 013 text m 3 would be sufficient to reduce water abstraction by 25 we find that if revenues from water pricing are returned in lump sum to households the introduction of water pricing would result in a modest welfare loss when revenues from water pricing are used to offset existing taxes we find a gain in welfare corresponding to a strong double dividend

multi stage sequential all pay auctions abstract we study multi stage sequential all pay contests auctions where heterogeneous contestants are privately informed about a parameter ability that affects their cost of effort we characterize the perfect bayesian equilibrium of these contests and analyze the effect of the number of contestants and their types on the contestants expected highest effort

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

can a water market avert the double whammy of trade reform and lead to a win win outcome abstract this paper focuses on the linkages between water and trade policies using morocco as a case this country is typical of many in that policy protects its import competing agricultural and industrial sectors while water in irrigated agriculture is priced below its marginal value product changing water policy without correcting for these other distortions leads to a more inefficient allocation of water on the other hand reforming trade policy alone can make farmers growing crops protected pre reform worse off using an intertemporal applied general equilibrium model we find that trade reform actually creates an opportunity to pursue water policy reform creating a water user rights market post trade reform not only compensates for the decline in farmers profits caused by the trade reform but also raises the efficiency of water allocation and hence benefits the economy as a whole

implementation in undominated strategies a look at bounded mechanisms this paper examines the impact of placing natural restrictions on the mechanisms considered for implementation problems it is shown that if all mechanisms are considered and preferences satisfy a basic condition then any social choice correspondence can be implemented in undominated strategies an example points out that the strength of this result derives from the use of mechanisms with questionable features in part of the message space the agent who announces the highest integer is rewarded this sort of tail chasing construction common in the constructive proofs of the literature is used to assure that undesired strategy combinations do not form an equilibrium if such mechanisms are ruled out then the social choice correspondences which can be implemented in undominated strategies satisfy an incentive compatibility type condition called strategy resistence for social choice functions this is equivalent to strategy proofness this contrast suggests that this issue should be examined as it applies to other solution concepts used in implementation theory the last portion of the paper begins to explore the issue as it relates to nash implementation and undominated nash implementation

gambling in contests with heterogeneous loss constraints i study the impact of asymmetric loss constraints on risk taking behavior in the contest model of seel and strack 2013 i derive the unique nash equilibrium outcome the equilibrium payoffs and comparative statics about the bankruptcy risk

crowdsourcing city government using tournaments to improve inspection accuracy can open tournaments improve the quality of city services the proliferation of big data makes it possible to use predictive analytics to better target services like hygiene inspections but city governments rarely have the in house talent needed for developing prediction algorithms cities could hire consultants but a cheaper alternative is to crowdsource competence by making data public and offering a reward for the best algorithm this paper provides a simple model suggesting that open tournaments dominate consulting contracts when cities have a reasonable tolerance for risk and when there is enough labor with low opportunity costs of time we also illustrate how tournaments can be successful by reporting on a boston based restaurant hygiene prediction tournament that we helped coordinate the boston tournament yielded algorithms at low cost that proved reasonably accurate when tested out of sample on hygiene inspections occurring after the algorithms were submitted we draw upon our experience in working with boston to provide practical suggestions for governments and other organizations seeking to run prediction tournaments in the future

recognition for sale abstract i examine the consequences of letting players compete for bargaining power in a multilateral bargaining game in each period the right to propose an offer is sold to the highest bidder and all players pay their bids if players vote according to any rule in which no player has veto power then the first proposer captures the entire surplus if a full consensus is needed for an offer to be accepted then the first proposer shares the surplus with at most one other player and as the period length between offers vanishes one player may capture virtually the entire surplus in settings with a stochastic or an endogenous surplus players are unwilling to efficiently delay agreement or invest in the surplus

soft money and campaign finance reform we analyze special interest influence on policy when political contributions are capped but the regulation contains soft money loopholes the politician chooses between two policy options we define special interest influence as the probability the politician chooses the policy he would not have chosen in the absence of contributions any binding cap reduces special interest influence but the effect may be nonmonotonic a ban on contributions can result in greater special interest influence than a binding but nonzero cap the results may also have implications for the policy response to the 2010 supreme court ruling on citizens united v fec

handicaps in incomplete information all pay auctions with a diverse set of bidders abstract in many contests a subset of contestants is granted preferential treatment which is presumably intended to be advantageous examples include affirmative action and biased procurement policies in this paper however i show that some of the supposed beneficiaries may in fact become worse off when the favored group is diverse the reason is that the other favored contestants become more aggressive which may outweigh the advantage that is gained over contestants who are handicapped the contest is modeled as an incomplete information all pay auction in which contestants have heterogenous and possibly non linear cost functions

using water allocation in israel as a proxy for imputing the value of agricultural amenities this paper uses the water allocation economy in israel as a proxy for imputing the value of agricultural amenities a general equilibrium model is developed and incorporates agricultural amenities as byproducts of agricultural production water trade channels and multiple water types the premise is that until a decade ago water policy in israel was interlinked with agricultural land use policy integrating a monte carlo analysis the model searches for a baseline minimum value of agricultural amenity that makes household in the counterfactual scenario indifferent between the administrative and market mechanisms the minimum imputed value is around 109 agricultural output the intuition is that the gains in economic welfare from improved water use efficiency are offset by the losses in social welfare due to a reduction in available agricultural amenities

whose opinion counts implementation by sortition abstract sortition is the process of selecting decision makers or senators by a lottery we introduce sortition in implementation theory by augmenting a mechanism with a kleroterion or lottery machine p that selects the senators an outcome is implemented after consulting only the opinions of the senators we call the corresponding notion of implementation as p implementation and provide necessary and sufficient conditions for p implementation our main result is that in economic environments every nash implementable social choice rule scr is also p implementable if p selects every quartet of players with positive probability and always selects at least three senators we apply this result to two kleroteria oligarchic democracy and random sampling in economic environments every nash implementable scr can be implemented by oligarchic democracy of three oligarchs in economic environments every nash implementable scr can be implemented by randomly selecting four senators

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

integrated water and economic modelling of the impacts of water market instruments on the south african economy a static computable general equilibrium model of south africa is adapted to compare new taxes on water demand by two industries namely forestry and irrigated field crops comparisons are made with respect to both the short and the long run in terms of three target variables namely i the environment ii the economy and iii equity since the taxes on the two industries do not raise the same amount of revenue the target variables are calculated per unit of real government revenue raised by the new taxes also referred to as the marginal excess burdens of the taxes the model results are robust for moderate values of the water elasticity of demand in the two industries in both the long and the short run the tax on irrigated field crops performs better in terms of all three the target variables in the short run in the long run the tax on irrigated filed crops is better in terms of water saving but reduces real gdp and the consumption by poor households

the lifeboat problem abstract we study an all pay contest with multiple identical prizes lifeboat seats prizes are partitioned into subsets of prizes lifeboats players play a two stage game first each player chooses an element of the partition a lifeboat then each player competes for a prize in the subset chosen a seat we characterize and compare the subgame perfect equilibria in which all players employ pure strategies or all players play identical mixed strategies in the first stage the partitioning of prizes can lead to coordination failure when players employ nondegenerate mixed strategies in these equilibria some rents are sheltered and rent dissipation is reduced

the distribution of talent across contests do the contests with the largest prizes attract the most able contestants to what extent do contestants avoid competition in this paper we show theoretically and empirically that the distribution of abilities plays a crucial role in determining contest choice complete sorting exists only when the proportion of high ability contestants is sufficiently small as this proportion increases high ability contestants shy away from competition and sorting decreases such that reverse sorting becomes a possibility we test our theoretical predictions with a large panel data set containing contest choice over twenty years we use exogenous variation in the participation of highly able competitors to provide empirical evidence for the relationship among prizes competition and sorting

do high interest rates stem capital outflows abstract conventional wisdom posits that high interest rates stem capital flight but if higher interest rates increase the probability of debt default they might have anti orthodox effects this note develops a framework for evaluating conditions under which this might occur

asymmetric all pay auctions with interdependent valuations abstract i show that a unique equilibrium exists in an asymmetric two player all pay auction with a discrete signal structure correlated signals and interdependent valuations the proof is constructive and the construction can be implemented as a computer program and be used to derive comparative statics i also characterize the set of equilibria when a reserve price is introduced

externalities in recruiting external recruiting at least weakly improves the quality of the pool of applicants but the incentive implications are less clear using a contest model this paper investigates the pure incentive effects of external recruiting our results show that if workers are heterogeneous opening up a firm s career system may lead to a homogenization of the pool of contestants and thus encourage the firm s high ability workers to exert more effort if this positive effect outweighs the discouragement of low ability workers the firm will benefit from external recruiting if however the discouragement effect dominates the homogenization effect the firm should disregard external recruiting in addition product market competition may mean that opening up the career system becomes less attractive for a firm since it increases the incentives of its competitors workers and hence strengthens the competitors

matching and price competition we develop a model in which firms set impersonal salary levels before matching with workers wages fall relative to any competitive equilibrium while profits rise almost as much implying little inefficiency furthermore the best firms gain the most from the system while wages become compressed in light of our results we discuss the performance of alternative institutions and the recent antitrust case against the national resident matching program

complexity and repeated implementation this paper examines the problem of repeatedly implementing an ecient social choice function when the agents preferences evolve randomly we show that the freedom to set dierent mechanisms at dierent histories can give the planner an additional leverage to deter undesirable behavior even if the mechanisms are restricted to be simple and nite specically we construct a history dependent sequence of simple mechanisms such that with minor qualications every pure subgame perfect equilibrium delivers the correct social choice at every history while every mixed equilibrium is strictly pareto dominated more importantly when faced with agents with a preference for less complex strategies at the margin the ecient social choice function can be repeatedly implemented in subgame perfect equilibrium in pure or mixed strategies our results demonstrate a positive role for complexity considerations in mechanism design

on the existence of pure and mixed strategy nash equilibria in discontinuous games a game is better reply secure if for every nonequilibrium strategy x and every payoff vector limit u resulting from strategies approaching x some player i has a strategy yielding a payoff strictly above u i even if the others deviate slightly from x if strategy spaces are compact and convex payoffs are quasiconcave in the owner s strategy and the game is better reply secure then a pure strategy nash equilibrium exists better reply security holds in many economic games it also permits new results on the existence of symmetric and mixed strategy nash equilibria

contests with three or more heterogeneous agents abstract we study monotone equilibrium behavior in contests with observable effort bid where three or more participants have distinct risk attitudes and the monetary value for the prize of each is drawn independently from a distinct distribution these differences can either cause a player to drop out that is always choose zero effort regardless of his valuation or use all or nothing strategies with discontinuous effort choice neither complete drop out nor discontinuous bidding with finitely many gaps is consistent with pure strategy monotone bayesian nash equilibrium in a contest with either ex ante identical players or only two distinct participants

competitive policy development we present a model of policy development in which competing factions have different ideologies yet agree on certain common objectives policy developers can appeal to a decision maker by making productive investments to improve the quality of their proposals these investments are specific to a given proposal which means that policy developers can potentially obtain informal agenda power competition undermines this agenda power forcing policy developers to craft policies that are better for the decision maker this beneficial effect is strongest if policy developers have divergent ideological preferences because their intense desire to affect policy motivates them to develop higher quality proposals jel d72 d73 d78 e61 during the early years of the new deal president franklin delano roosevelt faced an enormous challenge he believed that dramatic policy innovation was urgently needed on a wide range of issues including agriculture trade banking employment and social insurance however although roosevelt was well versed in policy crafting workable proposals for such a far reaching agenda was well beyond his capacity or that of his immediate advisors instead the president had to rely on a broader array of politicians and bureaucrats to develop new policies although these individuals shared some common goals e g ending the great depression they also had deep seated ideological disagreements among themselves and with the president about what policies the federal government should pursue classic and contemporary theories of bureaucratic politics would suggest that this situation was ripe for exploitation and inefficiency weber 1991 famously argued that the typical ruler of a modern state is reduced to being a mere dilettante when dealing with institutionalized bureaucratic actors more recently scholars

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

debt and creative destruction why could subsidizing corporate debt be optimal the existing theoretical literature provides little justification for a corporate debt subsidy we illustrate the welfare benefit of this subsidy and study how the social costs and benefits change with the duration of industry distress in our model two firms engage in socially wasteful competition for survival in a declining industry firms differ on two dimensions exogenous productivity and endogenously chosen amount of debt financing resulting in a two dimensional war of attrition debt financing increases incentives to exit which although costly for the firm is socially beneficial these benefits decline as industry distress shortens our normative model sheds light on why the debt tax subsidy still persists around the world analogously the model can also rationalize a seemingly ad hoc feature of the u s tax system which subsidizes the conflict of interest between debt and equity regarding firm liquidation this paper was accepted by amit seru finance

semi targeted all pay auctions a partial exclusion principle abstract this paper studies the effects of a specific affirmative action policy in complete information all pay auctions when players differ in ability the contest organizer splits the overall prize of the competition into a targeted and an untargeted prize the targeted prize is exclusively for disadvantaged low ability agents and excludes advantaged agents partially from the overall prize we consider a setting with one high ability and two low ability contestants and fully characterize equilibrium assuming that the contest organizer aims to maximize expected total effort we show that i almost any targeted prize is preferable to a standard all pay auction without targeted prize ii the exclusion principle baye et al 1993 can be implemented by a wide range of sufficiently large targeted prizes and iii partial exclusion by means of an appropriately chosen targeted prize benefits the organizer more than complete exclusion we also discuss the robustness of our results in settings with more than three agents

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

heterogeneous risk loss aversion in complete information all pay auctions we extend previous theoretical work on n player complete information all pay auctions to incorporate heterogeneous risk and loss averse utility functions we provide sufficient and necessary conditions for the existence of equilibria with a given set of active players with any strictly increasing utility functions and characterize the players equilibrium mixed strategies assuming that players can be ordered by their risk aversion player a is more risk averse than player b if whenever player b prefers a certain payment over a given lottery so does player a we find that in equilibrium the more risk averse players either bid higher than the less risk averse players and win with higher ex ante probability or they drop out furthermore while each player s expected bid decreases with the other players risk aversion her expected bid increases with her own risk aversion thus increasing a player s risk aversion creates two opposing effects on total expected bid a sufficient condition for the total expected bid to decrease with a player s risk aversion is that this player is relatively more risk averse compared to the rest of the players our findings have important implications for the literature on gender differences in competitiveness and for gender diversity in firms that use personnel contests for promotions

caps on political lobbying reply yeon koo che and ian l gale 1998 cg hereafter studied the impact of imposing a cap on lobbying expenditures they showed that a cap may lead to a greater expected aggregate expenditure and b a less efficient allocation of a political prize in their comment todd kaplan and david wettstein 2006 kw hereafter show that if the cap is not rigid i e its impact on the cost of lobbying is continuous it has no effect kw employ the same basic framework as cg except for the assumption that a bid of x costs a lobbyist c x for a strictly increasing continuous function c imposition of a cap raises costs to the strictly increasing continuous function c to see why the cap has no effect on lobbying expenditures in that setting think of a lobbyist choosing a cost c 0 rather than a bid the lobbyist who chooses the higher cost necessarily makes the higher bid because the lobbyists have the same strictly increasing cost function the functional relationship between bids and costs does not matter so the cap has no effect we explore the reasons for the different results and we show that cg s results can still hold in a more general environment two components underlie cg s analysis a a cap will constrain the stronger lobbyist thereby leveling the playing field and b this will intensify competition raising the expected aggregate expenditure in the case of kw s nonrigid cap the first effect does not arise since the stronger lobbyist can always outspend the weaker one this does not vitiate the second component however as will be seen when the cap has an equalizing effect it will intensify competition with the predicted effect on expenditures below we characterize the precise nature of an equalizing shift in costs more important we will describe plausible circumstances under which a nonrigid cap can generate an equalizing shift when lobbyists differ in their costs of lobbying for instance one lobbyist could be a more effective fundraiser than the other in such a case a cap on lobbying reduces the competitive gap between the lobbyists and it may cause the expected aggregate expenditure and the probability of misallocation to rise just as in cg

contests for experimentation we study contests for innovation with learning about the innovation s feasibility and opponents outcomes we characterize contests that maximize innovation when the designer chooses a prize sharing scheme and a disclosure policy a public winner takes all contest dominates public contests where any success is immediately disclosed with any other prize sharing scheme as well as winner takes all contests with any other disclosure policy yet jointly modifying prize sharing and disclosure can increase innovation in a broad class of mechanisms it is optimal to share the prize with disclosure following a certain number of successes under simple conditions a hidden equal sharing contest is optimal

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

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

coalition proof implementation abstract a new condition is shown to be necessary and sufficient for coalition proof nash equilibrium cpne implementation in environments with complete information this result implies that all choice functions are cpne implementable when individuals utility functions are bounded with respect to all variables except for money and are either analytic or quasi linear journal economic literature classification numbers c72 d72 d78

becoming a bad doctor we analyze a market with n rational rms doctors and a continuum of boundedly rational consumers patients following spiegler 2006a we assume that patients are not familiar with the market and rely on anecdotes we analyze the price setting game played by doctors with given dierent healing qualities doctors know their own quality as well as the qualities of their competitors in the unique equilibrium all doctors no matter how bad earn positive prots if doctors even costlessly choose their qualities doctors mainly oer mediocre qualities in all spne welfare may strictly decrease in the number of doctors

a natural mechanism to choose the deserving winner when the jury is made up of all contestants abstract we analyze the problem of a jury choosing the winner from a set of agents when the identity of the deserving winner is common knowledge amongst the jurors but each juror is biased in favor of one different agent we propose a simple and natural mechanism that implements the socially optimal rule the winner is the deserving winner in subgame perfect equilibria

efficient repeated implementation this paper examines repeated implementation of a social choice function scf with innitely lived agents whose preferences are determined randomly in each period an scf is repeated implementable in nash equilibrium if there exists a sequence of possibly history dependent mechanisms such that i its nash equilibrium set is non empty and ii every nash equilibrium outcome corresponds to the desired social choice at every possible history of past play and realizations of uncertainty we show with minor qualications that in the complete information environment an scf is repeated implementable in nash equilibrium if and only if it is ecient we also discuss several extensions of our analysis including constructions employing only nite mechanisms

caps in sequential contests i introduction in many competitions we can often observe situations where severe constraints are imposed on contestants for example in the u s electoral campaign there is a specific maximum campaign contribution that a single agent can make to a candidate 1 in sports where equipment plays a major role e g sailing motor races etc explicit or implicit technological constraints are imposed on the allowed equipment also several sports leagues e g the national basketball association nba implement a salary cap which places a limit on the total amount of money a team can spend on players salaries salary caps are clearly binding and teams are sometimes forced to trade expensive players in order to make place for other needed team members the usual reason for applying salary caps is that they facilitate even competition between small and large city teams otherwise large city teams could pay more buy the best talent and ultimately destroy any semblance of competition in the league the goal of caps imposed by designers of competitions is to create what we call a competitive balance so that many players have a chance to win and not necessarily the strongest ones in addition if the contest is more competitively balanced the uncertainty of the outcome is higher and therefore the contest is more attractive furthermore competitive balance may lead to an improvement of the expected total performance of all the players rather than just the performance of the top player several other ways have been suggested to enhance the competitive balance in contests for example baye kovenock and de vries 1993 showed that in all pay auctions contests by excluding the strongest player the player with the highest value of winning the contest becomes more competitively balanced and then the players expected total bid may increase moldovanu and sela 2001 found that in all pay auctions under incomplete information when cost functions are convex several positive prizes may be optimal for a designer who wishes to maximize the expected total bid in other words by increasing the number of the prizes the chances of the players with relatively low values of winning to win one of the prizes increase and therefore these players will increase their efforts accordingly cohen kaplan and sela 2008 studied all pay auctions with effort dependent rewards under incomplete information and demonstrated that when the designer maximizes the total bid effort and when there is a sufficiently large number of contestants the optimal reward decreases in the contestants bid this means that a designer will offer higher prizes to the players with relatively low values of winning those who exert lower efforts than to the players with relatively high values of winning those who exert higher efforts such a distribution of prizes balances the bids submitted by the players with high and low values of winning we focus here on the role of bid caps to enhance the competitive balance in contests relatively weak players players with low abilities or low values of winning usually exert low efforts which are lower than the level of the bid cap imposed by a designer in a contest with a bid cap if these players exert an effort that is equal to the bid cap they will have a higher chance to win since no one can exert a higher effort than the bid cap thus the weak players exert more effort than they would in a contest without a bid cap however relatively strong players players with high abilities or high values of winning usually exert higher efforts than the level of the bid cap thus the strong players exert less effort than they would in a contest without a bid cap hence the effect of the bid cap on the players total effort depends on the trade off between the increase of the weaker players efforts and the decrease of the stronger players efforts to be fully effective the bid cap system must guarantee that as many players as possible raise their efforts to the level of the bid cap and as less as possible reduce their efforts to this level

all pay auctions with affiliated binary signals abstract we analyze all pay auctions with affiliated values and binary signals we analyze the unique symmetric equilibrium with any number of bidders and show that the bidders earn positive rents only if the equilibrium is monotone we also characterize the symmetric equilibrium of the closely related two player war of attrition we compare expected revenues across these formats all pay auctions result in lower expected rents to the bidders than standard auctions but they also induce inefficient allocations in some models with affiliated private values with two bidders the effect on rent extraction dominates and the all pay auctions outperform standard auctions in terms of expected revenue with many bidders standard auctions may result in higher expected revenue the war of attrition outperforms the standard auctions in terms of revenue but its ranking relative to all pay auctions is ambiguous