Gambling in Contests

This paper presents a strategic model of risk-taking behavior in contests. Formally, we analyze an n-player winner-take-all contest in which each player decides when to stop a privately observed Brownian Motion with drift. A player whose process reaches zero has to stop. The player with the highest stopping point wins. Contrary to the explicit cost for a higher stopping time in a war of attrition, here, higher stopping times are riskier, because players can go bankrupt. We derive a closed-form solution of the unique Nash equilibrium outcome of the game. In equilibrium, the trade-off between risk and reward causes a non-monotonicity: highest expected losses occur if the process decreases only slightly in expectation

Continuois Time Contests

This paper introduces a contest model in which each player decides when to stop a privately observed Brownian motion with drift and incurs costs depending on his stopping time. The player who stops his process at the highest value wins a prize. Applications of the model include procurement contests and competitions for grants. We prove existence and uniqueness of the Nash equilibrium outcome, even if players have to choose bounded stopping times. We derive the equilibrium distribution in closed form. If the noise vanishes, the equilibrium outcome converges to - and thus selects - the symmetric equilibrium outcome of an all-pay auction. For two players and constant costs, each player’s profits increase if costs for both players increase, variance increases, or drift decreases. Intuitively, patience becomes a more important factor for contest success, which reduces informational rents

Four Essays in Economic Theory

This thesis consists of four chapters. The first three chapters analyze contest models in continuous time. Differing from most of previous literature, we assume that each contestant observes his own progress and can adjust his strategy accordingly, but learns nothing about his competitors. Chapter 1 studies risk-taking behavior in contests, while Chapters 2 and 3 focus on the trade-off between a higher cost (of research) and a higher chance to win the contest. In Chapter 4, we extend the valuation equilibrium concept and apply the modified concept to simple extensive-form games

A Meta Model Based Extension of BPMN 2.0 for Mobile Context Sensitive Business Processes and Applications

Smart devices like smartphones or tablets have become ubiquitous, which affected many daily work activities like maintaining contacts via a mobile CRM anywhere, anytime. Thus, business processes can now be executed independently of an employee’s location. In addition, mobile devices have the possibility to measure physical quantities through sensors, like location or acceleration. Moreover, the connection to wireless networks made it possible to query context information like customer history. These context information can be used to adapt mobile business processes and the mobile application that support them. But in order to use this advantage, mobile sensor data has to be reflected in the business process model. As current languages for process aware information systems, such as BPMN, do not support the influence of mobile context information, we propose an extension of the BPMN that will enable the modeling of mobile context sensitive business processes

Potentials in Social Environments

We develop and extend notions of potentials for normal-form games (Monderer and Shapley, 1996) to present a unified approach for the general class of social environments. The different potentials and corresponding social environments can be ordered in terms of their permissiveness. We classify different methods to construct potentials and we characterize potentials for specific examples such as matching problems, vote trading, multilateral trade, TU games, and various pillage games

Gambling in Risk-Taking Contests: Experimental Evidence

This paper experimentally investigates excessive risk taking in contest schemes by implementing a novel stopping task based on Seel and Strack (2013). In this stylized setting, managers with contest payoffs have an incentive to delay halting projects with a negative expectation, with the induced inefficiency being highest for a moderately negative drift. The experiment systematically varies the negative drift (between-subjects) and the payoff incentives (within-subject). We find evidence for excessive risk taking in all our treatment conditions, with the non-monotonicity at least as problematic as predicted. Contrary to the theoretical predictions, this aggregate pattern of behaviour is seen even without contest incentives. Further analysis suggests that many subjects display behaviour consistent with some intrinsic motivation for taking risk. This intrinsic motive and the strategic motive for excessive risk taking reinforce the non-monotonicity. The experiment uncovers a behavioural nuance where contest incentives crowd out an intrinsic inclination to gamble

The Last will be First, and the First Last: Segregation in Societies with Relative Payoff Concerns (RM/18/027-revised-)

This paper studies coalition formation among individuals who differ in productivity. The output of a coalition is determined by the sum of the productivities and the size of the coalition. We consider egalitarian societies in which coalitions split their surplus equally and individualistic societies in which the surplus of a coalition is split according to productivity. Preferences of coalition members depend on their material payoffs, but are also influenced by relative payoff concerns, which relate their material payoffs to the average material payoff in the coalition. Our analysis uses two stability notions, the Core and the Myopic Stable Set. The stable partitions in both egalitarian and individualistic societies are segregated, i.e., individuals with adjacent productivities form coalitions. If some individuals are not part of a productive coalition, then these are the least productive ones for egalitarian societies and the most productive ones for individualistic societies. If all individuals have different productivity levels and there are sufficient complementarities in production, egalitarian societies induce more efficiency than individualistic societies

Rationalizability and Nash equilibria in guessing games

Games in which players aim to guess a fraction or multiple p of the average guess are known as guessing games or (p -)beauty contests. In this note, we derive a full characterization of the set of rationalizable strategies and the set of pure strategy Nash equilibria for such games as a function of the parameter p, the number of players and the (discrete) set of available guesses to each player. (C) 2017 Elsevier Inc. All rights reserved