Side-Payments and the Costs of Conflict.

Conflict and competition often impose costs on both winners and losers, and conflicting parties may prefer to resolve the dispute before it occurs. The equilibrium of a conflict game with side-payments predicts that with binding offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30% of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 87% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 39% of gains come from avoided conflicts and 61% from reduced conflict expenditures.contests, conflict resolution, side-payments, experiments

Expenditures and Information Disclosure in Two- Stage Political Contests

This laboratory experiment studies two-stage contests between political parties. In the first stage, parties run their primaries and in the second stage the winners of the primaries compete in the general election. The resource expenditures in the first stage by the winning candidates are partially or fully carried over to the second stage. Experimental results support all major theoretical predictions: the first stage expenditures and the total expenditures increase, while the second stage expenditures decrease in the carryover rate. Consistent with the theory, the total expenditures increase in the number of candidates and the number of parties. Contrary to the theory, however, expenditures in both stages of the competition exceed theoretical predictions. Disclosing information about the opponent’s expenditures in the first stage increases the second stage expenditures and decreases the first stage expenditures.political contest, experiments, information uncertainty, over-expenditures

Simultaneous Decision-Making in Competitive and Cooperative Environments

MWe experimentally investigate simultaneous decision-making in two contrasting environments: a competitive environment (a contest) and a cooperative environment (a voluntary contribution mechanism). We find that the cooperative nature of the voluntary contribution mechanism spills over to the contest, decreasing sub-optimal overbidding in the contest. However, contributions to the public good are not affected by simultaneous participation in the contest. There is a significant negative correlation between decisions made in competitive and cooperative environments, i.e. more cooperative subjects tend to be less competitive and vice versa. This correlation can be rationalized by heterogeneous social preferences towards inequality but not by bounded rationality theory.cooperation, competition, public goods, contests, experiments, behavioral spillover

Best-of-Three Contests: Experimental Evidence

We conduct an experimental analysis of a best-of-three Tullock contest. Intermediate prizes lead to higher efforts, while increasing the role of luck (as opposed to effort) leads to lower efforts. Both intermediate prizes and luck reduce the probability of contest ending in two rounds. The patterns of players? efforts and the probability that a contest ends in two rounds is consistent with „strategic momentum?, i.e. momentum generated due to strategic incentives inherent in the contest. We do not find evidence for „psychological momentum?, i.e. momentum which emerges when winning affects players? confidence. Similar to previous studies of contests, we find significantly higher efforts than predicted and strong heterogeneity in effort between subjects.best-of-three contest, experiments, strategic momentum, psychological momentum

Resolving Conflicts by a Random Device

We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking contest for a fixed prize. Before conflict arises, both agents may agree to allocate the prize by coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. Laboratory experiments confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.Beauty contest, conflict resolution, experiments

The Equivalence of Contests

We use a Tullock-type contest to show that intuitively and structurally different contests can be strategically equivalent. Strategically equivalent contests generate the same best response functions and, as a result, the same efforts. Two strategically equivalent contests, however, may yield different equilibrium payoffs. We propose a simple two-step procedure to identify strategically equivalent contests. Using this procedure, we identify contests that are strategically equivalent to the original Tullock contest, and provide new examples of strategically equivalent contests. Finally, we discuss possible contest design applications and avenues for future theoretical and empirical research

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.rent-seeking, contest, spillover

Strategically Equivalent Contests

Using a two-player Tullock-type contest, we show that intuitively and structurally different contests can be strategically equivalent. Strategically equivalent contests generate the same best response functions and, as a result, the same equilibrium efforts. However, strategically equivalent contests may yield different equilibrium payoffs. We propose a simple two-step procedure to identify strategically equivalent contests. Using this procedure, we identify contests that are strategically equivalent to the original Tullock contest, and provide new examples of strategically equivalent contests. Finally, we discuss possible contest design applications and avenues for future theoretical and empirical research

Make Him an Offer He Can’t Refuse: Avoiding Conflicts through Side Payments

The equilibrium of a two-stage conflict game with side-payments predicts that with binding stage-one offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30% of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 98% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 49% of gains come from avoided conflicts and 51% from reduced conflict expenditures.contest, conflict resolution, side payments, experiments

Cognitive effort in the Beauty Contest Game

This paper analyzes cognitive effort in 6 different one-shot p-beauty games. We use both Raven and Cognitive Reflection tests to identify subjects' abilities. We find that the Raven test does not provide any insight on beauty contest game playing but CRT does: subjects with higher scores on this test are more prone to play dominant strategies.Beauty Contest Game, Raven, Cognitive Reflection Test