Rents, dissipation and lost treasures: comment

In an interesting recent paper, Dari-Mattiacci and Parisi (2005) extended Tullock.s (1980) rent-seeking game with an entry decision. The mixed strategies identified by Dari-Mattiacci and Parisi for the case of increasing returns in the contest success function (r > 2) do not constitute an equilibrium of the game they study. However, these strategies are an equilibrium if the strategy space of the game is restricted by a minimum expenditure requirement, and this minimum expenditure requirement is an element of a specific interval

Contests with Investment

Perfectly discriminating contests (or all pay auction) are widely used as a model of situations where individuals devote resources to win some prize. In reality such contests are often preceded by investments of the contestants into their ability to fight in the contest. This paper studies a two stage game where in the first stage, players can invest to lower their bid cost in a perfectly discriminating contest, which is played in the second stage. Different assumptions on the timing of investment are studied. With simultaneous investments, equilibria in which players play a pure strategy in the investment stage are asymmetric, exhibit incomplete rent dissipation, and expected effort is reduced relative to the game without investment. There also are symmetric mixed strategy equilibria with complete rent dissipation. With sequential investment, the first mover always invests enough to deter the second mover from investing, and enjoys a first mover advantage. I also look at unobservable investments and endogenous timing of investments

Lobbying contests with endogenous policy proposals

Lobbyists choose what to lobby for. If they can precommit to certain policy proposals, their choice will have an influence on the behavior of opposing lobbyists. Hence lobbyists have an incentive to moderate their policy proposals in order to reduce the intensity of the lobbying contest. This logic has been explored in a number of recent papers. I reconsider the topic with a perfectly discriminating contest. With endogenous policy proposals, there is a subgame perfect equilibrium where the proposals of the lobbyists coincide and maximize joint welfare; moreover, this equilibrium is the only one that survives repeated elimination of dominated strategies. Hence there is no rent dissipation at all. A politician trying to maximize lobbying expenditures would prefer an imperfectly discriminating contest

Simultaneous inter- and intra-group conflicts

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004This paper models the trade-off between production and appropriation in the presence of simultaneous inter- and intra-group conflicts. The model exhibits a ‘group cohesion effect ’: if the contest between the groups becomes more decisive, or contractual incompleteness between groups becomes more serious, the players devote fewer resources to the intra-group conflict. Moreover, there is also a ‘reversed group cohesion effect’: if the intra-group contests become less decisive, or contractual incompleteness within groups becomes less serious, the players devote more resources to the inter-group contest. The model also sheds new light on normative questions. I derive exact conditions for when dividing individuals in more groups leads to more productive and less appropriative activities. Further, I show that there is an optimal size of the organization which is determined by a trade-off between increasing returns to scale in production and increasing costs of appropriative activities

Group contest success functions

This paper extends the axiomatic characterization of contest success functions of Skaperdas (1996) and Clark and Riis (1998) to contests between groups. – Contest ; conflict ; axiom ; group -- Eine contest success function beschreibt, wie in einem Wettkampf die Gewinnwahrscheinlichkeiten von den Einsätzen der Beteiligten abhängen. Dieser Aufsatz verallgemeinert die auf Skaperdas (1996) und Clark und Riis (1998) zurückgehende axiomatische Fundierung von contest success functions, indem er Wettkämpfe zwischen Gruppen untersucht.

Simultaneous inter- and intra-group conflicts

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004This paper models the trade-off between production and appropriation in the presence of simultaneous inter- and intra-group conflicts. The model exhibits a ‘group cohesion effect ’: if the contest between the groups becomes more decisive, or contractual incompleteness between groups becomes more serious, the players devote fewer resources to the intra-group conflict. Moreover, there is also a ‘reversed group cohesion effect’: if the intra-group contests become less decisive, or contractual incompleteness within groups becomes less serious, the players devote more resources to the inter-group contest. The model also sheds new light on normative questions. I derive exact conditions for when dividing individuals in more groups leads to more productive and less appropriative activities. Further, I show that there is an optimal size of the organization which is determined by a trade-off between increasing returns to scale in production and increasing costs of appropriative activities.Conflict; rent-seeking; federalism; hierarchy

Contests with Investment

Perfectly discriminating contests (or all pay auction) are widely used as a model of situations where individuals devote resources to win some prize. In reality such contests are often preceded by investments of the contestants into their ability to fight in the contest. This paper studies a two stage game where in the first stage, players can invest to lower their bid cost in a perfectly discriminating contest, which is played in the second stage. Different assumptions on the timing of investment are studied. With simultaneous investments, equilibria in which players play a pure strategy in the investment stage are asymmetric, exhibit incomplete rent dissipation, and expected effort is reduced relative to the game without investment. There also are symmetric mixed strategy equilibria with complete rent dissipation. With sequential investment, the first mover always invests enough to deter the second mover from investing, and enjoys a first mover advantage. I also look at unobservable investments and endogenous timing of investments.contests; all pay auctions; investment

Selection tournaments, sabotage, and participation

This paper studies sabotage in tournaments with at least three contestants, where the contestants know each other well. Every contestant has an incentive to direct sabotage specifically against his most dangerous rival. In equilibrium, contestants who choose a higher productive effort are sabotaged more heavily. This might explain findings from psychology, where victims of mobbing are sometimes found to be overachieving. Further, sabotage equalizes promotion chances. The effect is most pronounced if the production function is linear in sabotage, and the cost function depends only on the sum of all sabotage activities: in an interior equilibrium, who will win is a matter of chance, even when contestants differ a great deal in their abilities. This, in turn, has adverse consequences for who might want to participate in a tournament. Since better contestants anticipate that they will be sabotaged more strongly, it may happen that the most able stay out and the tournament selects one of the less able with probability one. I also study the case where some contestants are easy victims, i. e. easier to sabotage than others. -- Firmen setzen häufig Anreize, indem sie die Leistung der Mitarbeiter vergleichen, und die erfolgreichsten befördern oder eine Prämie bezahlen. Solche Anreizsysteme werden in der Literatur als Turniere bezeichnet. Da es in einem Turnier nur darauf ankommt, besser zu sein als die Konkurrenten, hat jeder einen Anreiz, seine Konkurrenten zu sabotieren. Dieser Aufsatz studiert Sabotage in Turnieren zwischen mindestens drei Teilnehmern. Jeder hat einen Anreiz, seinen gefährlichsten Gegner am meisten zu sabotieren. Im Gleichgewicht werden diejenigen, die am produktivsten arbeiten, am stärksten sabotiert. Dies mag Forschungsergebnisse aus der Psychologie erklären, in denen sich zeigt, dass die Opfer von Mobbing besonders leistungsorientiert sind. Darüberhinaus führt Sabotage zu einer Angleichung der Gewinnwahrscheinlichkeiten. Der Effekt ist am deutlichsten wenn die Produktionsfunktion linear in Sabotage ist, und die Kostenfunktion nur von der Summe der Sabotageaktivitäten abhängt: In einem inneren Gleichgewicht ist es reiner Zufall, wer gewinnt, auch wenn die Teilnehmer sehr unterschiedliche Fähigkeiten haben. Dies hat auch Rückwirkungen auf die Bereitschaft, an dem Turnier teilzunehmen. Da bessere Spieler voraussehen, dass sie mehr sabotiert werden werden, sind ihre Anreize teilzunehmen unter Umständen geringer als die von weniger fähigen Spielern. Deshalb ist ein Turnier nicht als Auswahlmechanismus geeignet ist, wenn Sabotage eine wichtige Rolle spielt.Tournament,contest,sabotage,selection

Lobbying contests with endogenous policy proposals

Lobbyists choose what to lobby for. If they can precommit to certain policy proposals, their choice will have an influence on the behavior of opposing lobbyists. Hence lobbyists have an incentive to moderate their policy proposals in order to reduce the intensity of the lobbying contest. This logic has been explored in a number of recent papers. I reconsider the topic with a perfectly discriminating contest. With endogenous policy proposals, there is a subgame perfect equilibrium where the proposals of the lobbyists coincide and maximize joint welfare; moreover, this equilibrium is the only one that survives repeated elimination of dominated strategies. Hence there is no rent dissipation at all. A politician trying to maximize lobbying expenditures would prefer an imperfectly discriminating contest.Interest groups; Endogenous lobbying targets; Voluntary restraint; Polarization

Contests with investment

Perfectly discriminating contests (or all pay auction) are widely used as a model of situations where individuals devote resources to win some prize. In reality such contests are often preceded by investments of the contestants into their ability to fight in the contest. This paper studies a two stage game where in the first stage, players can invest to lower their bid cost in a perfectly discriminating contest, which is played in the second stage. Different assumptions on the timing of investment are studied. With simultaneous investments, equilibria in which players play a pure strategy in the investment stage are asymmetric, exhibit incomplete rent dissipation, and expected effort is reduced relative to the game without investment. There also are symmetric mixed strategy equilibria with complete rent dissipation. With sequential investment, the first mover always invests enough to deter the second mover from investing, and enjoys a first mover advantage. I also look at unobservable investments and endogenous timing of investments. -- Vollständig diskriminierende Wettkämpfe (auch all-pay auctions genannt) werden häufig als ein Modell von Situationen verwendet, in denen Individuen Ressourcen aufwenden, um einen Preis zu gewinnen. In der Realität können die Beteiligten vor dem eigentlichen Wettkampf Investitionen in ihre Fähigkeiten vornehmen. Dieser Aufsatz untersucht ein zwei-Stufen Spiel, in dem in der ersten Stufe die Spieler investieren können, um ihre Bietkosten in einem vollständig diskriminierenden Wettkampf, der auf der zweiten Stufe gespielt wird, zu senken. Verschiedene Annahmen über die Zeitstruktur der Investitionsstufe werden untersucht. Bei gleichzeitigen Investitionen sind alle Gleichgewichte, in denen die Spieler reine Strategien in der Investitionsstufe spielen, asymmetrisch, haben unvollständige Rentendissipation, und der erwartete Einsatz ist niedriger als in dem Spiel ohne Investitionen. Es gibt auch symmetrische Gleichgewichte gemischten Strategien. Bei sequentiellen Investitionen investiert der zuerst investierende Spieler stets so viel, dass er den zweiten davon abschreckt zu investieren; zuerst zu ziehen stellt den Spieler besser. Der Aufsatz untersucht außerdem den Fall unbeobachtbarer Investitionen, und ein Spiel mit endogener Zugfolge.Contests,all pay auctions,investment