The Equivalence of Contests

We use a Tullock-type contest model to show that intuitively and structurally different contests can be strategically and revenue equivalent to each other. We consider a two-player contest, where outcome-contingent payoffs are linear functions of prizes, own effort, and the effort of the rival. We identify strategically equivalent contests that generate the same family of best response functions and, as a result, the same revenue. However, two strategically equivalent contests may yield different equilibrium payoffs. Finally, we discuss possible contest design applications and avenues for future theoretical and empirical research.rent-seeking, contest, spillover, equivalence, revenue equivalence, contest design

A generalized Tullock contest

We construct a generalized Tullock contest under complete information where contingent upon winning or losing, the payoff of a player is a linear function of prizes, own effort, and the effort of the rival. This structure nests a number of existing contests in the literature and can be used to analyze new types of contests. We characterize the unique symmetric equilibrium and show that small parameter modifications may lead to substantially different types of contests and hence different equilibrium effort levels.rent-seeking, contest, spillover

Conflict in the Time of (Post-) Corona: Some Assessments from Behavioral Economics

We present a non-technical assessment of the effects of the COVID-19 pandemic on individual level conflict behavior in the household, workplace, and societal interactions in the post-COVID era. We predict that there will be an increase in the intra-household conflict including domestic violence; and the divorce rate will rise. Within workplaces, the pandemic will result both in a higher level of sabotage among the employees, and employee retaliation towards the employer. The pandemic may also affect the diversity and inclusiveness within an organization adversely. In societal interactions, an increase in the identity related conflicts – especially related to the immigration status – can be observed. It is also likely that there will be an increase in the attack and defense or victimization activities in the society. We conclude by proposing various measures for conflict resolution, and a few possible areas of further investigations

An experimental investigation of Colonel Blotto games

This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetric resources in which players maximize the expected number of battlefields won. The experimental results support all major theoretical predictions. In the auction treatment, where winning a battlefield is deterministic, disadvantaged players use a “guerilla warfare” strategy which stochastically allocates zero resources to a subset of battlefields. Advantaged players employ a “stochastic complete coverage” strategy, allocating random, but positive, resource levels across the battlefields. In the lottery treatment, where winning a battlefield is probabilistic, both players divide their resources equally across all battlefields. -- Dieser Artikel untersucht das Verhalten von Individuen in einem „constant-sum Colonel Blotto“-Spiel zwischen zwei Spielern, bei dem die Spieler mit unterschiedlichen Ressourcen ausgestattet sind und die erwartete Anzahl gewonnener Schlachtfelder maximieren. Die experimentellen Ergebnisse bestätigen alle wichtigen theoretischen Vorhersagen. Im Durchgang, in dem wie in einer Auktion der Sieg in einem Schlachtfeld deterministisch ist, wenden die Spieler, die sich im Nachteil befinden, eine „Guerillataktik“ an, und verteilen ihre Ressourcen stochastisch auf eine Teilmenge der Schlachtfelder. Spieler mit einem Vorteil verwenden eine Strategie der „stochastischen vollständigen Abdeckung“, indem sie zufällig eine positive Ressourcenmenge auf allen Schlachtfeldern positionieren. Im Durchgang, in dem sich der Gewinn eines Schlachtfeldes probabilistisch wie in einer Lotterie bestimmt, teilen beide Spieler ihre Ressourcen gleichmäßig auf alle Schlachtfelder auf.Colonel Blotto,conflict resolution,contest theory,multi-dimensional,resource allocation,rent-seeking,experiments

The hidden perils of affirmative action: Sabotage in handicap contests

Contests are ubiquitous in economic, organizational and political settings. Contest designers often use tools to make a contest among asymmetric contestants more even, in order to either elicit higher effort levels, or for ethical reasons. Handicapping – in which stronger participants are a priori weakened – is one successful tool that is widely used in sports, promotional tournaments and procurement auctions. In this study we show theoretically that participants may also increase their destructive effort, and sabotage their rivals’ performance, when handicapping is employed. We empirically verify this prediction using data on 19,635 U.K. horse-races in 2011 and 2012. Our results suggest that while a level field may be conducive to heightened positive effort in general, in a setting where both handicapping and sabotage are present it also lays the ground for greater destruction

An Experimental Investigation of Colonel Blotto Games

This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetric resources in which players maximize the expected number of battlefields won. The experimental results support all major theoretical predictions. In the auction treatment, where winning a battlefield is deterministic, disadvantaged players use a “guerilla warfare” strategy which stochastically allocates zero resources to a subset of battlefields. Advantaged players employ a “stochastic complete coverage” strategy, allocating random, but positive, resource levels across the battlefields. In the lottery treatment, where winning a battlefield is probabilistic, both players divide their resources equally across all battlefields.Colonel Blotto, conflict resolution, contest theory, multi-dimensional resource allocation, rent-seeking, experiments

Post-Cartel Tacit Collusion: Determinants, Consequences, and Prevention

We experimentally investigate the determinants of post-cartel tacit collusion (PCTC), the effects of PCTC on market outcomes, and potential policy measures aimed at its prevention. PCTC occurs robustly with or without fines or leniency and is determined both by collusive price hysteresis and learning about cartel partners’ characteristics and strategies. As a result, it is also strongly related to the preceding cartel success. PCTC generates a downward bias in the estimated cartel overcharges. This threatens the effectiveness of deterrence induced by private damage litigation and fines imposed on colluding firms based on the overcharge. This bias further increases with preceding cartel stability such that especially more stable sets of colluding firms may be deterred less when PCTC is present. Rematching colluding subjects with strangers within a session prevents PCTC. This indicates that barring colluding managers from their posts could help impede PCTC in the field

“Small, yet Beautiful”: Reconsidering the optimal design of multi-winner contests

We reconsider whether a grand multi-winner contest elicits more equilibrium effort than a collection of sub-contests. Fu and Lu (2009) employ a sequential winner-selection mechanism and find support for running a grand contest. We show that this result is completely reversed if a simultaneous winner-selection mechanism or a sequential loser-elimination mechanism is implemented. We then discuss the optimal allocation of players and prizes among sub-contests