On the evolution of prize perceptions in contests

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 the behavior evolutionarily stable preferences induce and evolutionarily stable strategies.Contest; Prize valuation; Preference evolution; Evolutionarily stable preferences

THE Economics of Match-Fixing

The phenomenon of match-fixing does constitute a constant element of sport contests. This paper presents a simple formal model in order to explain it. The intuition behind is that an asymmetry in the evaluation of the stake is the key factor leading to match-fixing. In sum, this paper considers a partial equilibrium model of contest where two asymmetric, rational and risk-neutral opponents evaluate differently a contested stake. Differently from common contest models, agents have the option of choosing a second instrument to affect the outcome of the contest. The second instrument is assumed to capture positive investments in ‘contest management’ – namely efforts paving the way for a match-fixing. In particular, it will be demonstrated that, under some conditions, an asymmetry in the evaluation of the stake can lead to a concession from one agent to the other and then to a match-fixing. Eventually the intuitions and results of the model will be applied to make a comparison between the FIFA World Cup and the UEFA Champions League tournaments.Contest; Football; Sport Contest; Contest Management; Match-Fixing; Asymmetry in evaluation; Concession; FIFA; UEFA; CHampions League; World Cup

Incomplete Information and Rent Dissipation in Deterministic Contests

In a deterministic contest or all-pay auction, all rents are dissipated when information is complete and contestants are identical. As one contestant becomes "stronger", that is, values the prize more, total expenditures are known to decrease monotonically. Thus, asymmetry among contestants reduces competition and rent dissipation. Recently, this result has been shown to hold for other, non-deterministic, contest success functions as well, thereby suggesting a certain robustness. In this paper, however, the complete information assumption is shown to be crucial. With incomplete information -- regardless of how little -- total expenditures in a deterministic two-player contest increase when one contestant becomes marginally stronger, starting from a symmetric contest. In fact, both contestants expend resources more aggressively; with complete information, neither of them do so.All-pay auctions, Asymmetric auctions, Rent seeking.

A Very Simple Model of Conflict with Asymmetric Evaluations and Institutional Constraint

This paper considers a partial equilibrium model of conflict where two asymmetric, rational and risk-neutral opponents conflict in order to appropriate a positive fraction of a stake. An institutional constraint is modelled through an exogenously fixed element as a feature of a modified Contest Success Function. However, this very simple model shows that even if conflicting agents are willing to commit themselves to ease the conflict joining an institutional setting they do not ‘disarm’. The findings of the model show that: (a) both agents prefer to settle under an institutional constraint if and only if an exogenous institutional fee is fixed under a critical value; (b) the critical value of the institutional fee is directly related to the evaluation of the stake each agent does retain; (c) the agents with a higher evaluation of the stake has a higher willingness to settle.Conflict, asymmetric evaluations, contest success function, institutional constraint

Fending off one Means Fending off all: Evolutionary Stability in Submodular Games (new title: Fending off one means fending off all: evolutionary stability in quasi-submodular aggregative games)

The implications of evolutionarily stable behavior in finite populations have recently been explored for a variety of aggregative games. This note proves an intimate relationship between submodularity and global evolutionary stability of strategies for these games, which -apart from being of independent interest - accounts for a number of results obtained in the recent literature: we show that any evolutionarily stable strategy (ESS) of a submodular aggregative game must also be globally stable. I.e. if one mutant cannot successfully invade a population, any number of mutants can even less do so.

Does Delegation Help to Prevent Spiteful Behavior?

The direct evolutionary approach according to Leininger (2003) states that players in a two player Tullock rent-seeking contest within a fi nite population behave „as if“ they were relative payoff maximizers. Accordingly contest expenditures are higher than in Nash equilibrium. The indirect evolutionary approach also predicts more aggressive behavior by the players since negatively interdependent preferences are evolutionary stable. Both players are willing to harm themselves in material terms just to harm their opponent even more. I consider that every player in the contest has to contract a delegate either using a relative contract or a no-win-nopay contract. I show that delegation once introduced is able to overcompensate all negative eff ects of negatively interdependent objective functions. But as in the case without delegation a commitment on more aggressive behavior is a dominant strategy. Nevertheless delegation endows principals with a material payoff that is equal to the payoff an individualistic player facing another individualistic player would get.Contest; strategic delegation; spite; agency theory

Merger and collusion in contests

Competition in some product markets takes the form of a contest. If some firms cooperate in such markets, they must decide how to allocate effort on each of their products and whether to reduce the number of their products in the competition. We show how this decision depends on the convexity properties of the contest success function, and we characterize conditions under which cooperation is profitable. -- In vielen Gütermärkten erfolgt der Wettbewerb zwischen Unternehmen nicht primär über Preise und Mengen, sondern über Verkaufsanstrengungen. Ein Beispiel hierfür ist der Kampf um Marktanteile und Kunden in Märkten mit hohen Werbeaufwendungen. Wenn Unternehmen in solchen Märkten kooperieren, müssen sie entscheiden, ob sie ihre gesamte Produktpalette beibehalten und ihre Verkaufsanstrengungen auf alle Produkte verteilen („Kollusion“) oder ob sie die Anzahl ihrer Produkte reduzieren („Fusion“). Wir zeigen, daß diese Entscheidung von den Konvexitätseigenschaften der Funktion abhängt, die den Markterfolg eines Produkts in Abhängigkeit von den Verkaufsanstrengungen für dieses Produkt bzw. für die Konkurrenzprodukte bestimmt, und untersuchen die Bedingungen, in denen Kooperation in Form von „Kollusion“ oder „Fusion“ für die kooperierenden Unternehmen profitabel ist.Contests,merger,collusion,promotional competition,Kampf um Marktanteile,Kollusion,Fusion

Evolutionarily stable in-group favoritism and out-group spite in intergroup conflict

We study conflict between two groups of individuals. Using Schaffer`s (1988) concept of evolutionary stability we provide an evolutionary underpinning for in-group altruism combined with spiteful behavior towards members of the rival out-group. We characterize the set of evolutionarily stable combinations of in-group favoritism and out-group spite and find that an increase in in-group altruism can be balanced by a decrease in spiteful behavior towards the out-group

Technologies of Conflict

We explore theoretical foundations and issues in the empirical estimation of conflict technologies. Such technologies are probabilistic choice functions that depend on the military capacities of adversaries, where the military capacities themselves depend on economic inputs via ordinary production functions. Different classes of functional forms can be derived stochastically or axiomatically. The additive form, in particular, (which includes both the logit and ratio functional forms) has both stochastic and axiomatic foundations. Issues in the empirical estimation that we explore include concerns with data, endogeneity, structural breaks, and model comparison.

Rent, risk, and replication: preference adaptation in winner-take-all markets

We study the evolution of an economy where agents who are heterogeneous with respect to risk attitudes can either earn a certain income or enter a risky rent-seeking contest. We assume that agents behave rationally given their preferences, but that the population distribution of preferences evolves over time in response to material payoffs. We show that, in particular, initial distributions with full support converge to stationary states where all types may still be present, risk lovers specialize in rentseeking, and the available rents are perfectly dissipated. -- Der Autor untersucht die Entwicklung einer Volkswirtschaft, in der sich die Akteure in ihrer Einstellung zu Risiken unterscheiden. Sie können entweder ein bestimmtes Einkommen erlangen oder sich in einen riskanten Rent-Seeking-Wettbewerb (Wettbewerb zum Erlangen einer Rente) begeben. Angenommen wird rationales Verhalten der Akteure bei gegebenen Präferenzen an, wobei sich die Verteilung der Präferenzen innerhalb der Bevölkerung als Antwort auf die materiellen Ergebnisse des Wettbewerbs entwickelt. Es wird gezeigt, daß im einzelnen, die ursprünglichen Verteilungen mit ganzer Unterstützung gegen stationäre Zustände konvergieren, in welchen noch immer alle Typen präsent sein können. Dabei spezialisieren sich risikofreudige Individuen auf Rent-seeking und die erzielbaren Renten sind perfekt gestreut.Preference evolution, risk attitudes, contests, winner-take-all markets