Coalition formation in a contest game with three heterogeneous players

We analyze the incentives for cooperation of three players differing in their efficiency of effort in a contest game. We concentrate on the non-cooperative bargaining foundation of coalition formation, and therefore, we adopt a two-stage model. In the first stage, individuals form coalitions following a bargaining protocol similar to the one proposed by Gul (1989). Afterwards, coalitions play the contest game of Esteban and Ray (1999) within the resulting coalition structure of the first stage. We find that the grand coalition forms whenever the distribution of the bargaining power in the coalition formation game is equal to the distribution of the relative efficiency of effort. Finally, we use the case of equal bargaining power for all individuals to show that other types of coalition structures may be observed as well.

Does affirmative action reduce effort incentives? A contest game analysis

In this paper a contest game with heterogeneous players is analyzed in which heterogeneity could be the consequence of past discrimination. Based on the normative perception of the heterogeneity there are two policy options to tackle this heterogeneity: either it is ignored and the contestants are treated equally, or affirmative action is implemented which compensates discriminated players. The consequences of these two policy options are analyzed for a simple two-person contest game and it is shown that the frequently criticized trade-off between affirmative action and total effort does not exist: Instead, affirmative action fosters effort incentives. A generalization to the n-person case and to a case with a partially informed contest designer yields the same result if the participation level is similar under each policy.

Inter-group conflict and intra-group punishment in an experimental contest game

We study how conflict in a contest game is influenced by rival parties being groups and by group members being able to punish each other. Our main motivation stems from the analysis of socio-political conflict. The relevant theoretical prediction in our setting is that conflict expenditures are independent of group size and independent of whether punishment is available or not. We find, first, that our results contradict the independence of group-size prediction: conflict expenditures of groups are substantially larger than those of individuals, and both are substantially above equilibrium. Towards the end of the experiment material losses in groups are 257% of the predicted level. There is, however, substantial heterogeneity in the investment behaviour of individual group members. Second, allowing group members to punish each other after individual contributions to the contest effort are revealed leads to even larger conflict expenditures. Now material losses are 869% of the equilibrium level and there is much less heterogeneity in individual group members' investments. These results contrast strongly with those from public goods experiments where punishment enhances efficiency and leads to higher material payoffs.

Foundations for contest success functions

In the literature the outcome of contests is either interpreted as win probabilities or as shares of the prize. With this in mind, we examine two approaches to contest success functions. In the first we analyze the implications of contestants' incomplete information concerning the "type" of the contest administrator. While in the case of two contestants this approach can rationalize prominent contest success functions, we show that it runs into difficulties when there are more agents. Our second approach interprets contest success functions as sharing rules and establishes a connection to bargaining and claims problems which is independent of the number of contestants. Both approaches provide foundations for popular contest success functions and guidelines for the definition of new ones. Keywords: Endogenous Contests, Contest Success Function. JEL Classification: C72 (Noncooperative Games), D72 (Economic Models of Political Processes: Rent-Seeking, Elections), D74 (Conflict; Conflict Resolution; Alliances).

Welfare Maximizing Contest Success Functions when the Planner Cannot Commit

We analyze how a contest organizer chooses optimally the winner when the contestants' efforts are already exerted and commitment to the use of a given contest success function is not possible. We de…ne the notion of rationalizability in mixed-strategies to capture such a situation. Our approach allows to derive different contest success functions depending on the aims and attitudes of the decider. We derive contest success functions which are closely related to commonly used functions providing new support for them. By taking into account social welfare considerations our approach bridges the contest literature and the recent literature on political economy. Keywords: Endogenous Contests, Contest Success Function, Mixed-Strategies. JEL Classi…cation: C72 (Noncooperative Games), D72 (Economic Models of Political Processes: Rent-Seeking, Elections), D74 (Conflict; Conflict Resolution; Alliances)

One, two, (three), infinity: Newspaper and lab beauty-contest experiments

"Beauty-contest" is a game in which participants have to choose, typically, a number in [0,100], the winner being the person whose number is closest to a proportion of the average of all chosen numbers. We describe and analyze Beauty-contest experiments run in newspapers in UK, Spain, and Germany and find stable patterns of behavior across them, despite the uncontrollability of these experiments. These results are then compared with lab experiments involving undergraduates and game theorists as subjects, in what must be one of the largest empirical corroborations of interactive behavior ever tried. We claim that all observed behavior, across a wide variety of treatments and subject pools, can be interpretedas iterative reasoning. Level-1 reasoning, Level-2 reasoning and Level-3 reasoning are commonly observed in all the samples, while the equilibrium choice (Level-Maximum reasoning) is only prominently chosen by newspaper readers and theorists. The results show the empirical power of experiments run with large subject-pools, and open the door for more experimental work performed on the rich platform offered by newspapers and magazines.

Rational reasoning or adaptive behavior? Evidence from two-person beauty contest games

Many experiments have shown that human subjects do not necessarily behave in line with game theoretic assumptions and solution concepts. The reasons for this non-conformity are multiple. In this paper we study the argument whether a deviation from game theory is because subjects are rational, but doubt that others are rational as well, compared to the argument that subjects, in general, are boundedly rational themselves. To distinguish these two hypotheses, we study behavior in repeated 2-person and many-person Beauty-Contest-Games which are strategically different from one another. We analyze four different treatments and observe that convergence toward equilibrium is driven by learning through the information about the other player s choice and adaptation rather than self-initiated rational reasoning.

On p-beauty contest integer games

In this paper we provide a full characterization of the pure-strategyNash Equilibria for the p-Beauty Contest Game when we restrict player schoices to integer numbers. Opposed to the case of real number choices,equilibrium uniqueness may be lost depending on the value of p and thenumber of players: in particular, as p approaches 1 any symmetric profileconstitutes a Nash Equilibrium. We also show that any experimental p-BeautyContest Game can be associated to a game with the integer restriction andthus multiplicity of equilibria becomes an issue. Finally, we show thatin these games the iterated deletion of weakly dominated strategies maynot lead to a single outcome while the iterated best-reply process alwaysdoes (though the outcome obtained depends on the initial conditions).

Finite mixture analysis of beauty-contest data using generalised beta distributions

This paper introduces a mixture model based on the beta distribution, without preestablishedmeans and variances, to analyze a large set of Beauty-Contest data obtainedfrom diverse groups of experiments (Bosch-Domenech et al. 2002). This model gives a bettert of the experimental data, and more precision to the hypothesis that a large proportionof individuals follow a common pattern of reasoning, described as iterated best reply (degenerate),than mixture models based on the normal distribution. The analysis shows thatthe means of the distributions across the groups of experiments are pretty stable, while theproportions of choices at dierent levels of reasoning vary across groups.

The Instrumental voter goes to the news-agent: demand for information, election closeness, and the media

This paper studies the impact of instrumental voting on information demand and mass media behaviour during electoral campaigns. If voters act instrumentally then information demand should increase with the closeness of an election. Mass media are modeled as profit-maximizing firms that take into account information demand, the value of customers to advertisers and the marginal cost of customers. Information supply should be larger in electoral constituencies where the contest is expected to be closer, there is a higher population density, and customers are on average more profitable for advertisers. The impact of electorate size is theoretically undetermined. These conclusions are then tested with comfortable results on data from the 1997 general election in Britain.

When does universal peace prevail? Secession and group formation in rent seeking contests and policy conflicts

This paper analyzes secession and group formation in a general model of contest inspired by Esteban and Ray (1999). This model encompasses as special cases rent seeking contests and policy conflicts, where agents lobby over the choice of a policy in a one-dimensional policy space. We show that in both models the grand coalition is the efficient coalition structure and agents are always better off in the grand coalition than in a symmetric coalition structure. Individual agents (in the rent seeking contest) and extremists (in the policy conflict) only have an incentive to secede when they anticipate that their secession will not be followed by additional secessions. Incentives to secede are lower when agents cooperate inside groups. The grand coalition emerges as the unique subgame perfect equilibrium outcome of a sequential game of coalition formation in rent seeking contests.

All-pay auction equilibria in contests

We analyze (non-deterministic) contests with anonymous contest success functions. There is no restriction on the number of contestants or on their valuations for the prize. We provide intuitive and easily verifiable conditions for the existence of an equilibrium with properties similar to the one of the (deterministic) all-pay auction. Since these conditions are fulfilled for a wide array of situations, the predictions of this equilibrium are very robust to the specific details of the contest. An application of this result contributes to fill a gap in the analysis of the popular Tullock rent- seeking game because it characterizes properties of an equilibrium for increasing returns to scale larger than two, for any number of contestants and in contests with or without a common value. Keywords: (non-) deterministic contest, all-pay auction, contest success functions. JEL Classification Numbers: C72 (Noncooperative Games), D72 (Economic Models of Political Processes: Rent-Seeking, Elections), D44 (Auctions).

Scepticism Revisited

Liberalism claims that for a subject S to be justified in believing p, a proposition about the external world, on the basis of his senses it is not necessary to be antecedently justified in believing propositions as there is an external world. On the other hand, conservatism claims that to be justified in believing that p on the basis of one’s perception, one must have antecedent justification to believe that p. Intuitively, we are inclined to think that liberalism about the structure of perceptual justification fits better with our epistemic practices. We acknowledge that, although we cannot produce warrant for the background belief in the external world, our empirical beliefs can be perceptually justified. However, I am interested in arguing that conservatism is theoretically better supported than liberalism. The first reason to defend this is based on the fact that in embracing liberalism dogmatism is affected by pervasive problems. The second one comes from recognizing the strength of the argument based on the thesis that experience is theory-laden. But not all are advantages for conservatism. Conservatism is presupposed in contemporary formulations of scepticism through the requirement of prior justification for background assumptions, and this fact compels anti-sceptical conservatives to conceive a non-evidential form of warrant, entitlement, to contest the sceptical threat My main worry is that, although the path of entitlement has some prospects to succeed, this new notion of justification seems to be posed ad hoc for conservatives to solve the sceptical problem. These contents are organized along the three chapters. The result of chapter 1 is a pattern of sceptical argument formed by two premises: P1*, a conservative principle, and P2*. In chapter 2 and chapter 3 two anti-sceptical proposals against the argument sketched in chapter 1 are described. Chapter 2 is devoted to explain and assess a first anti-sceptical proposal that denies P1*: dogmatism. Moreover, in chapter 3, another anti-sceptical strategy is described (the route of entitlement) that contests scepticism denying the plausibility of P2*.

The Lottery Blotto Game

In this paper we relax the Colonel Blotto game assumption that for a given battle the player who allocates the higher measure of resources wins that battle. We assume that for a given battle, the Colonel who allocates the higher measure of resources is more likely to win that battle. We have a simpler model for which we are able to compute all Nash equilibria in pure strategies for any valuations pro le that players might have. Something that is not possible for the original Blotto game. JEL: C72, D74, H56. KEYWORDS: Colonel Blotto game; lottery contest function.

The distribution of talent across contests

Do the contests with the largest prizes attract the most able contestants? Towhat extent do contestants avoid competition? In this paper, we show, theoreticallyand empirically, that the distribution of abilities plays a crucial role in determiningcontest choice. Sorting exists only when the proportion of high-ability contestantsis sufficiently small. As this proportion increases, contestants shy away from competitionand sorting decreases, such that, reverse sorting becomes a possibility. Wetest our theoretical predictions using a large panel data set containing contest choiceover three decades. We use exogenous variation in the participation of highly-ablecompetitors to provide empirical evidence for the relationship among prizes, competition,and sorting.