"Who's the thief?": Asymmetric Information and the Creation of Property Rights

This paper studies the creation of property rights in a state of anarchy and in the presence of uncertainty about a potential appropriator's ability. In a game of conflict, securing property can be achieved by spending resources for protection. We show that secure property rights will never emerge in equilibrium. The reason for this finding is not that it is not possible to secure property in principle, but that because of uncertainty agents will choose to protect their possessions against an expected appropriator and not against the most able one. Hence, agents voluntarily expose themselves to the risk of losing ownership. This finding has important consequences, since secure property rights are a fundamental prerequisite of economic activity, and insecure property may for example hinder the exploitation of mutually beneficial trade opportunities or distort investment and production incentives.Asymmetric Information, Property Rights, Conflict

"Where Ignorance is Bliss, 'tis Folly to be Wise": Transparency in Contests

Increasingly, lobbying groups are subject to transparency requirements, obliging them to provide detailed information about their business. We study the effect this transparency policy has on the nature of lobbying competition. Under mild conditions, mandated transparency leads to an increase in wastefulness of lobbying competition and a decline in expected allocative efficiency. Hence we identify a negative side-effect of transparency policy, which also has implications for various other fields such as political campaigning or firm competition.Transparency Policy, Rent-seeking Contests, Information Disclosure, Value of Ignorance

Head starts in dynamic tournaments?

In promotion contests or other tournament-like situations, a principal may attach some value to the highest effort expended by an agent. We show that whenever agents interact over multiple periods, awarding a head start to one of them is optimal even with completely symmetric agents. Awarding a small head start increases maximum individual effort without decreasing aggregate effort. (C) 2016 Elsevier B.V. All rights reserved.Philipp Denter gratefully acknowledges the support from the Ministerio Economia y Competitividad (Spain) through grants ECO2014-55953-P and MDM 2014-0431

Do Polls create Momentum in Political Competition?

__Abstract__ We explore how public opinion polls affect candidates' campaign spending in political competition. Generally, polls lead to (more) asymmetric behavior. Under a majority rule there always exists an equilibrium in which the initially more popular candidate invests more in the campaign and thereby increases her lead in expectation: polls create momentum. When campaigning is very effective and the race is very close, a second type of equilibrium may exist: the trailing candidate outspends and overtakes his opponent. Regardless of the type of equilibrium, polls have a tendency to decrease expected total campaigning expenditures by amplifying ex-ante asymmetries between candidates and thus defusing competition. When candidates care also for their vote share in addition to having the majority, candidates' incentives crucially depend on the distribution of voters' candidate preferences

Left Behind Voters, Anti-Elitism and Popular Will

Populists are often anti-elitist and advocate for popular will over expertise. We show that these two populist characteristics are responses to mainstream parties leaving behind the majority of voters, the common people. Our model highlights two forces behind electoral success: numbers, which favor the common people, and knowledge, which favors the elite. Electoral competition may lead parties to cater to the elite. We identify conditions under which an elite bias encourages entry with an anti-elite platform. Finally, we identify conditions under which parties follow the common people's opinion when that group would bene t from parties relying on experts

Left Behind Voters, Anti-Elitism and Popular Will

Populists are often anti-elitist and advocate for popular will over expertise. We show that these two populist characteristics are responses to mainstream parties leaving behind the majority of voters, the common people. Our model highlights two forces behind electoral success: numbers, which favor the common people, and knowledge, which favors the elite. Electoral competition may lead parties to cater to the elite. We identify conditions under which an elite bias encourages entry with an anti-elite platform. Finally, we identify conditions under which parties follow the common people's opinion when that group would bene t from parties relying on experts

Showing off or laying low? The economics of psych-outs

We analyze the incentives for showing off, which we model as a costly signaling game, and study the consequences of norms against such behavior. Prior to competing in a contest, a newcomer can signal his talent to an incumbent. In equilibrium, costly signaling of ability occurs only when the newcomer is exceptionally talented. In such situations signaling benefits both contestants: the newcomer for obvious reasons; the incumbent by economizing on wasted effort in the contest. Our results rationalize the emergence of norms against showing off in settings where total effort is important. When selection efficiency matters, such norms decrease welfareDenter and Sisak gratefully acknowledge the financial support of the Swiss National Science Foundation through grants PBSGP1-135426 (Denter) and PBSGP1-130765 (Sisak). Denter gratefully acknowledges the support from the Ministerio Economia y Competitividad (Spain) through grants ECO2014-55953-P, MDM 2014-0431, and PGC2018-098510-B-I00

On the Merits of Meritocracy

We study career choice when competition for promotion is a contest. A more meritocratic profession always succeeds in attracting the highest ability types, whereas a profession with superior promotion benefits attracts high types only if the hazard rate of the noise in performance evaluation is strictly increasing. Raising promotion opportunities produces no systematic effect on the talent distribution, while a higher base wage attracts talent only if total promotion opportunities are sufficiently plentifu

Performance and Relative Incentive Pay: The Role of Social Preferences

__Abstract__ Under relative performance pay, other-regarding workers internalize the negative externality they impose on other workers. In one form -increased own effort reduces others' payoffs- this results in other-regarding individuals depressing efforts. In another form punishment reduces the payoff of other workers- groups with other-regarding individuals feature higher efforts because it is more difficult for these individuals to sustain low-effort (collusive) outcomes. We explore these effects experimentally and find other-regarding workers tend to depress efforts by 15% on average. However, selfish workers are nearly three times more likely to lead workers to coordinate on minimal efforts when communication is possible. Hence, the social preferences composition of a team of workers has nuanced consequences on efforts

Do People Who Care About Others Cooperate More? Experimental Evidence from Relative Incentive Pay

We experimentally study ways in which the social preferences of individuals and groups affect performance when faced with relative incentives. We also identify the mediating role that communication and leadership play in generating these effects. We find other-regarding workers tend to depress efforts by 15% on average. However, selfish workers are nearly three times more likely to lead workers to coordinate on minimal efforts when communication is possible. Hence, the other-regarding composition of a team of workers has complex consequences for organizational performance