An axiomatization of difference-form contest success funcions [WP]

This paper presents an axiomatic characterization of difference-form group contests, that is, contests fought among groups and where their probability of victory depends on the difference of their effective efforts. This axiomatization rests on the property of Absolute Consistency, stating that the difference in winning probabilities between two contenders in the grand contest must be the same as when they engage in smaller contests. This property overcomes some of the drawbacks of the widely-used ratio-form contest success functions. Our characterization shows that the criticisms commonly-held against difference-form contests success functions, such as lack of scale invariance, are unfounded. Finally, we extend our axiomatization to relative-difference contests where winning probabilities depend on the difference of contenders effective efforts relative to total aggregate effort

Homo economicus vs homo sapiens?

La crisi va ser la demostració incontestable que la recerca del benefici propi és una de les motivacions fonamentals de l'ésser humà en molts contextos, i especialment en els mercats. Significa això que l'homo sapiens és un homo economicus? No, en absolut. Hi ha una diferència clau entre assumir que l'ésser humà és en essència una criatura egoista, perfecta i maximitzadora, i assumir les característiques de l'homo economicus com una bona primera aproximació per estudiar determinats fenòmens

Gender differences and stereotypes in the beauty contest

Recent literature has emphasized that individuals display different depths of reasoning when playing games. In this paper, we explore gender differences in strategic sophistication and study whether these differences are endogenous. We report results from two different experiments employing the beauty contest. In the first, large study, we show that females react very strongly to incentives to the extent that gender differences disappear when a monetary prize is awarded. In the second study, we use a within subject design to analyze how depth of reasoning varies with gender priming and the gender composition of the set of players. We corroborate that females display higher levels of sophistication and even overtake males when incentives are provided and gender is primed. On the other hand, males who believe that females are better in the game display higher sophistication when playing against females

Gender differences and stereotypes in strategic thinking

Recent literature has emphasized that individuals display varying levels of strategic reasoning. This paper presents ten years worth of experimental data from two countries exploring the existence and endogeneity of gender differences in strategic sophistication. We report results from two experimental studies employing the beauty contest game, one from the classroom and one from the laboratory

Incumbency (dis)advantage when citizens can propose

This paper analyses the problem that an incumbent faces during the legislature when deciding how to react to citizen proposals such as the outcome of referenda or popular initiatives. We argue that these proposals constitute a potential source of electoral disadvantage when citizens factor in their evaluation of the incumbent his reaction to these proposals. This is because an incumbent politician may jeopardize his re-election by implementing policies close to his preferred ones but unpopular among the electorate. We characterize conditions under which this potential disadvantage becomes in fact an electoral advantage for the incumbent. We find that the choices of the incumbent during the legislature will be closest to citizens policy proposals when the intensity of electoral competition is neither too soft nor too tough. Finally, we use our results to discuss some implications of the use of mechanisms such as referenda and popular assemblies on electoral competition and on the incumbency advantage phenomenon

The effect of within-group inequality in a conflict against a unitary threat

A group of agents must defend their individual income from an external threat by pooling their efforts against it. The winner of this confrontation is determined by a contest success function where members’ efforts may display different degrees of complementarity. Individual effort is costly and follows a convex isoelastic function. We investigate how the success of the group in the conflict and its members’ utilities vary with the degree of within-group inequality. We show that there is a natural relationship between the group’s probability of victory and the Atkinson index of inequality. If members’ efforts are complementary or the cost function convex enough, more egalitarianism within the group increases the likelihood of victory against the external threat. The opposite holds when members’ efforts are substitutes and the cost linear enough. Finally, we obtain conditions under which richer members of the group are willing to make transfers to poorer membres in order to enhance their final payoff

Difference-form group contests

Contests are situations in which a set of agents compete for a valuable object, rent or award. The present paper analyzes difference-form group contests, that is, contests fought among groups and where their probability of victory depends on the difference of their effective efforts. First, we show that the non-existence of pure-strategy equilibria and the monopolization results obtained in previous analysis of difference-form contests rest critically on the assumption of a linear cost of effort. Under exponential costs, we show that pure strategy equilibria exist in a large set of cases and that more tan one group can expend positive effort in equilibrium. Second, we show that inequality of valuations of victory within groups hinders their chances of prevailing in the contest. If possible; members may find beneficial to engage in progressive redistribution within their group

On the Relationship between Market Concentration and Bank Risk Taking

We analyse risk-taking behaviour of banks in the context of spatial competition. Banks mobilise unsecured deposits by offering deposit rates, which they invest either in a prudent or in a gambling asset. Limited liability along with high return of a successful gamble induce moral hazard at the bank level. We show that when the market concentration is low, banks invest in the gambling asset. On the other hand, for sufficiently high levels of market concentration, all banks choose the prudent asset to invest in. We further show that a merger of two neighboring banks increases the likelihood of prudent behaviour. Finally, introduction of a deposit insurance scheme exacerbates banks’ moral hazard problem.Market concentration; Bank mergers; Risk-taking

Facial Masculinity: How the Choice of Measurement Method Enables to Detect Its Influence on Behaviour

Recent research has explored the relationship between facial masculinity, human male behaviour and males' perceived features (i.e. attractiveness). The methods of measurement of facial masculinity employed in the literature are quite diverse. In the present paper, we use several methods of measuring facial masculinity to study the effect of this feature on risk attitudes and trustworthiness. We employ two strategic interactions to measure these two traits, a first-price auction and a trust game. We find that facial width-to-height ratio is the best predictor of trustworthiness, and that measures of masculinity which use Geometric Morphometrics are the best suited to link masculinity and bidding behaviour. However, we observe that the link between masculinity and bidding in the first-price auction might be driven by competitiveness and not by risk aversion only. Finally, we test the relationship between facial measures of masculinity and perceived masculinity. As a conclusion, we suggest that researchers in the field should measure masculinity using one of these methods in order to obtain comparable results. We also encourage researchers to revise the existing literature on this topic following these measurement methods

Conflict as a Part of the Bargaining Process

This paper investigates the use of conflict as a bargaining instru-ment. It first revises the arguments explaining the role of confrontation as a source of information and its use during negotiations. Then it of-fers evidence illustrating this phenomenon by analyzing a sample of colonial and imperial wars. The second part of the paper explores a bargaining model with one-sided incomplete information. Parties can choose the scope of the confrontation they may want to engage in: An absolute conflict that terminates the game or a limited conflict that only introduces delay and conveys information about the even-tual outcome of the absolute one. It is shown that confrontation has a double-edged effect: It may paradoxically open the door to agreement when the uninformed party is so optimistic that no agreement is feasi-ble. But it can also create inefficiency when agreement is possible but the informed agent has an incentive to improve her bargaining position by fighting