Leading-effect vs. Risk-taking in Dynamic Tournaments: Evidence from a Real-life Randomized Experiment

Two 'order effects' may emerge in dynamic tournaments with information feedback. First, participants adjust effort across stages, which could advantage the leading participant who faces a larger 'effective prize' after an initial victory (leading-effect). Second, participants lagging behind may increase risk at the final stage as they have 'nothing to lose' (risk-taking). We use a randomized natural experiment in professional two-game soccer tournaments where the treatment (order of a stage-specific advantage) and team characteristics, e.g. ability, are independent. We develop an identification strategy to test for leading-effects controlling for risk-taking. We find no evidence of leading-effects and negligible risk-taking effects

Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets

We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets that are integrated at the distributor level by parallel imports (PI). The manufacturing firm needs to set these two prices to balance three competing interests: restricting competition in the PI-recipient market, avoiding resource wastes due to actual trade, and reducing the double-markup problem in the PI-source nation. These trade-offs imply the counterintuitive result that both wholesale and retail prices could diverge as a result of declining trading costs, even as the volume of PI increases. Thus, in some circumstances it may be misleading to think of PI as an unambiguous force for price integration

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

Employee share ownership in a unionised duopoly

Profit sharing schemes have been analysed assuming Cournot competition and decentralised wage negotiations, and it has been found that firms share profits in equilibrium. This paper analyses a different remuneration system: employee share ownership. We find that whether firms choose to share ownership or not depends on both the type of competition in the product market and the way in which workers organise to negotiate wages. If wage setting is decentralised, under duopolistic Cournot competition both firms share ownership. If wage setting is centralised, only one firm shares ownership if the degree to which goods are substitutes takes an intermediate value; otherwise, the two firms share ownership. In this case, if the union sets the same wage for all workers neither firm shares ownership. Therefore, centralised wage setting discourages share ownership. Fi- nally, under Bertrand competition neither firm shares ownership regardless of how workers are organised to negotiate wages.info:eu-repo/semantics/publishedVersio

Tradable Pollution Permits and the Regulatory Game

This paper analyzes polluters\u27 incentives to move from a traditional command and control (CAC) environmental regulatory regime to a tradable permits (TPP) regime. Existing work in environmental economics does not model how firms contest and bargain over actual regulatory implementation in CAC regimes, and therefore fail to compare TPP regimes with any CAC regime that is actually observed. This paper models CAC environmental regulation as a bargaining game over pollution entitlements. Using a reduced form model of the regulatory contest, it shows that CAC regulatory bargaining likely generates a regulatory status quo under which firms with the highest compliance costs bargain for the smallest pollution reductions, or even no reduction at all. As for a tradable permits regime, it is shown that all firms are better off under such a regime than they would be under an idealized CAC regime that set and enforced a uniform pollution standard, but permit sellers (low compliance cost firms) may actually be better off under a TPP regime with relaxed aggregate pollution levels. Most importantly, because high cost firms (or facilities) are the most weakly regulated in the equilibrium under negotiated or bargained CAC regimes, they may be net losers in a proposed move to a TPP regime. When equilibrium costs under a TPP regime are compared with equilibrium costs under a status quo CAC regime, several otherwise paradoxical aspects of firm attitudes toward TPP type reforms can be explained. In particular, the otherwise paradoxical pattern of allowances awarded under Phase II of the 1990 Clean Air Act\u27s acid rain program, a pattern tending to favor (in Phase II) cleaner, newer generating units, is explained by the fact that under the status quo regime, a kind of bargained CAC, it was the newer cleaner units that were regulated, and which therefore had higher marginal control costs than did the largely unregulated older, plants. As a normative matter, the analysis here implies that the proper baseline for evaluating TPP regimes such as those contained in the Bush Administration\u27s recent Clear Skies initiative is not idealized, but nonexistent CAC regulatory outcomes, but rather the outcomes that have resulted from the bargaining game set up by CAC laws and regulations