Resolving Conflicts by a Random Device (original) (raw)
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When parity promotes peace: Resolving conflict between asymmetric agents
Journal of Economic Behavior & Organization, 2014
Due to the high costs of conflict both in theory and practice, we examine and experimentally test the conditions under which conflict between asymmetric agents can be resolved. We model conflict as a two-agent rent-seeking contest for an indivisible prize. Before conflict arises, both agents may agree to allocate the prize by fair coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. The results of the experiment confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
CONTESTS WITH RANDOM NOISE AND A SHARED PRIZE
2008
This note introduces a model of contests with random noise and a shared prize that combines features of and Lazear and Rosen (1981). Similar to results in Lazear and Rosen, as the level of noise decreases the equilibrium effort rises. As the noise variance approaches zero, the equilibrium effort of the shared-prize contest approaches that of a Tullock lottery contest.
Social Choice and Welfare, 2006
The main drawback of the public-policy contest is that the notion of contest success function, a crucial component of the contest model, does not have microfoundations and, therefore, the random behavior of the government seems ad-hoc. In the present paper we propose a partial micro-foundation for the public-policy contest. The possible rationalization of random government behavior is illustrated in the case of the all-pay auction and Tullock's lottery logit functions. We also clarify how stake asymmetry, lobbying-skill asymmetry and return to lobbying effort determine the relative desirability, from the government's point of view, of these CSFs.
2006
Abstract This paper considers a partial equilibrium model of conflict where two asymmetric, rational and risk-neutral opponents clash in order to redistribute a divisible prize in their favour. Differently from common contest models agents have the option of choosing a second instrument to affect the outcome of the conflict. The second instrument is assumed to capture a complex bundle of Conflict Management Procedures (CMPs). Through comparative statics, different scenarios are studied.
The main drawback of the public-policy contest is that the notion of contest success function, a crucial component of the contest model, does not have micro-foundations and, therefore, the random behavior of the government seems ad-hoc. In the present paper we propose a partial micro-foundation for the public-policy contest. The possible rationalization of random government behavior is illustrated in the case of the all-pay auction and Tullock's lottery logit functions. We also clarify how stake asymmetry, lobbying-skill asymmetry and return to lobbying effort determine the relative desirability, from the government's point of view, of these CSFsinterest groups, policy makers, lobbying, public-policy contests, contest success function, rationalization of random government's behavior
Winner-Take-All and Proportional-Prize Contests: Theory and Experimental Results
SSRN Electronic Journal, 2000
This study provides a unified framework to compare three canonical forms of competition: winner-take-all contests won by the best performer, winner-take-all lotteries where probability of success is proportional to performance, and proportional-prize contests in which rewards are shared in proportion to performance. Performance is affected by random noise, reflecting imperfect information. We derive equilibria and observe outcomes from each contest in a laboratory experiment. Equilibrium and observed efforts are highest in winner-take-all contests. Lotteries and proportional-prize contests have the same Nash equilibrium, but empirically, lotteries induce contestants to choose higher efforts and receive lower, more unequal payoffs. This result may explain why contest designers who seek only to elicit effort offer lumpsum prizes, even though contestants would be better off with proportional rewards.
Bargaining with random implementation: An experimental study
Games and Economic Behavior, 2012
We use a laboratory experiment to study bargaining with random implementation. We modify the standard Nash demand game so that incompatible demands do not necessarily lead to the disagreement outcome. Rather, with exogenous probability q, one bargainer receives his/her demand, with the other getting the remainder. We use an asymmetric bargaining set (favouring one bargainer) and disagreement payoffs of zero, and we vary q over several values. Our results mostly support game theory's directional predictions. As with conventional arbitration, we observe a strong chilling effect on bargaining for q near one: extreme demands and low agreement rates. Increasing q reinforces the game's built-in asymmetry-giving the favoured player an increasingly large share of payoffs-but also raising efficiency. These effects are non-uniform: over sizable ranges, increases in q have minimal effect, but for some q, small additional increases lead to sharp changes in results.
Contests With Heterogeneous Agents
SSRN Electronic Journal, 2006
We study tournaments with many ex-ante asymmetric contestants, whose valuations for the prize are independently distributed. First, we characterize the equilibria in monotone strategies, second, we provide sufficient conditions for the equilibrium uniqueness and, finally, we reconcile the experimental evidence documenting the 'workaholic' behavior in contests with the related theory by introducing heterogeneity among participants. It is a 'weak' participant that might become a 'workaholic' in an equilibrium, that is, his effort density might increase at the highest valuation-weak, either because he is more risk averse or because his rivals consider that it is very unlikely that he has a high value for the prize. In contrast, effort densities are always decreasing in case of symmetry with identically distributed values for the prize and identical attitudes towards risk in case of CARA, as well as in contests with only two participants. Moreover, we show that for low valuations more risk averse agents are less likely to exert low effort than their 'strong' rivals, while those with dominated distribution of the prize valuation are more likely to do so. An explicit solution for the uniform distribution case with contestant-specific support is provided as well.
2006
When a person's payoff depends on both her action and probabilistic events, the action she chooses and her payoff can be understood as random variables. This paper shows that incentive compatibility implies that when a person chooses among two actions, conditional on these two actions, her action is nonnegatively correlated with the payoff difference between the two actions. This simple and robust result has implications in a wide variety of contexts, including individual choice under uncertainty, strategic form games, and incomplete information games. Incentive compatibility constraints have an immediate "statistical" interpretation.