Due to the limitation of 40 participants and lunch that will be served at the workshop, please let us know whether you will be attending.
To sign up, send an e-mail to a.m.j.sandsor at econ.uio.no by the 15th of October.
Also, let colleagues who might be interested know about the workshop so that they may sign up.
Directions to Rådsalen available here
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Contests is a term used to describe many different sorts of strategic interaction, from market competition, through procurement, to violent conflicts and war. In this workshop, we want to explore the consequences of inequality – as well as consequences for inequality – in various forms of contests. In particular, we want to see how differences in technology or resource availability among contest participants may affect the contest outcome, and how various contest designs may differ with respect to inequalities in the participants’ (expected) outcome.
When it comes to ex-ante inequalities, one might argue that participants who have lower costs of exerting contest effort may have an edge in the contest and therefore give other participants reduced incentives to exert effort.
When it comes to ex-post inequalities, one might ask if there are contest designs that we should expect to lead to increased inequality and, correspondingly, if there are contest designs that lead to reduced inequality.
A next step might be to look closer at the consequences of contests that take place repeatedly. If, for example, winning a contest today gives you an edge in tomorrow’s contest, there may well be incentives for exerting effort also for the currently disadvantaged participants, since winning today may put one in the position of being a leader in a future contest.
In contexts where there is a contest designer present, such as in procurement, the question arises as to how the effects of inequalities should affect the contest design. For example, when there are (potentially) multiple contests to be held, one may ask how a contest designer would want to split her total prize budget across the contests.
(Description, program and abstracts can be found here )
Program Friday October 23
11:00-12:00: Halvor Mehlum (and Kalle Moene) (Department of Economics, University of Oslo) presents "Kings and Farmers".
12:00-13:00: Lunch
13:00-14:00: Oliver Gürtler (Department of Economics, BWL II, University of Bonn) presents "Optimal Tournament Contracts for Heterogeneous Workers".
14:00-14:15: Break
14:15-15:15: Ola Kvaløy (Department of Economics, University of Stavanger) presents ”Tournaments with prize setting agents”
15:15-15:30: Break
15:30-16:30: Scott Gates (Centre for the Study of Civil War, International Peace Research Institute, Oslo) presents “Biased Property Rights and Communal Violence”
16:30-17:30: Kai Konrad (Max Planck Institute for Intellectual Property, Competition and Tax Law) presents The Lifeboat Problem
Program Saturday October 24
09:15-10:15 Tore Nilssen (Department og economics, University of Oslo) presents "Dynamic win effects in sequential contests"
10:15-10:30 Break
10:30-11:30 Aner Sela (Department of Economics, Ben-Gurion University of the Negev, Israel) presents “Allocation of Prizes in Contests with Participation Constraints”
11:30-11:45 Break
11:45-12:45 Rene Kirkegaard (Department of Economics, Brock University) presents “Favoritism in Asymmetric Contests: Head Starts and Handicaps”
12:45-13:45 Lunch
13:45-14:45 Stergios Skaperdas (Department of Economics, UC Irvine) presents "Cognitive Policy Capture"
14:45-15:00 Break
15:00-16:00 Karl Wärneryd (Department of Economics, Stockholm School of Economics) presents "Democracy, Inequality, and International Conflict"
16:00-17:00 Nils-Henrik M. von der Fehr (Department of Economics, University of Oslo) presents "Investment Incentives and Market Design"
Abstracts
Halvor Mehlum (and Kalle Moene): Friday October 23, 11:00-12:00
"Kings and Farmers"
We look at the interaction between two groups, each containing one king and several farmers. The farmers may or may not collaborate across groups while the kings may or may not go to war. In the case of conflict the return from collaboration is destroyed. Hence, the farmers from different groups will chose not to collaborate if they expect conflict to erupt.
We derive how the probability of war depends on the costs of fighting, the resources to be grabbed, and on the degree of collaboration. We show that there is an element of self-fulfilling prophecies as a high degree of collaboration prevents the kings from choosing conflict. Our model may explain how some relations, between ethnic groups or between social classes, may end up in collaboration while others end up in conflict.
Oliver Gürtler: Friday October 23, 13:00-14:00
"Optimal Tournament Contracts for Heterogeneous Workers"
The previous literature has shown that rank-order tournaments will lead to inefficient outcomes if workers are heterogeneous. In our paper, we can show that the employer implements efficient effort levels for all workers by using a modified prize structure. Hence, heterogeneity per se is not an argument against a rank-order tournament as incentive device, even if performance information is ordinal and therefore the use of handicaps impossible.
Ola Kvaløy: Friday October 23, 14:15-15:15
”Tournaments with prize setting agents”
In many tournaments it is the contestants themselves who determine reward allocation. Labor-union members bargain over wage distribution, and many firms allow self-managed teams to freely determine internal resource allocation, incentive structure, and division of labor. We analyze, and test experimentally, a rank-order tournament where heterogeneous agents determine the spread between winner prize and looser prize. We investigate the relationship between prize spread, uncertainty (i.e. noise between effort and performance), heterogeneity and effort. The paper challenges well-known results from tournament theory. We find that a large prize spread is associated with low degree of uncertainty and high degree of heterogeneity, and that heterogeneity triggers effort. By and large, our real-effort experiment supports the theoretical predictions.
Scott Gates: Friday October 23, 15:30-16:30
“Biased Property Rights and Communal Violence”
One of the central aspects of conflict between pastoral and sedentary agricultural groups regards different notions of property. The pastoralist focuses on his herds, while the farmer attends to his land. To better understand communal conflict between pastoralists and sedentary agriculturalists, property rights protection (PRP) and the bias in this protection are featured in our analysis. Using a contest success function model, we build in an assumption that increasing PRP reduces the effectiveness of appropriative effort (i.e. conflict-oriented behavior), generally increasing the equilibrium allocation of productive effort (peace). In addition, PRP is modeled as potentially biased in favor of one group, producing a non-monotonic result with respect to increasing PRP. Specifically, if a society has a moderate level of PRP but some degree of bias away from equity, an increase in PRP can result in either a decrease or an increase in total appropriative effort. Thus, simply increasing PRP without addressing issues of bias can increase the level of conflict in a society. We apply this formal model to the case of communal conflict between pastoralists and sedentary agriculturalists in Kenya and to the 19th Century US range wars fought between the cattlemen and homesteaders. We argue that this has implications for international organizations that encourage state governments to focus on strengthening property rights institutions without addressing the more sensitive issue of bias.
Kai A. Konrad (with Dan Kovenock): Friday October 23, 16:30-17:30
“The Lifeboat Problem”
Paper available here
We study an all-pay contest with multiple identical prizes ("lifeboat seats"). Prizes are partitioned into subsets of prizes ("lifeboats"). Players play a twostage game. First, each player chooses an element of the partition ("a lifeboat"). Then each player competes for a prize in the subset chosen ("a seat"). We characterize and compare the subgame perfect equilibria in which all players employ pure strategies or all players play identical mixed strategies in the first stage. We find that the partitioning of prizes allows for coordination failure among players when they play nondegenerate mixed strategies and this can shelter rents and reduce rent dissipation compared to some of the less efficient pure strategy equilibria.
Tore Nilssen (with Derek John Clark and Jan Yngve Sand): Saturday October 24, 09:15-10:15
"Dynamic win effects in sequential contests"
In this paper we consider competitors who compete against each other repeatedly, using the results of previous contests to affect their strength in the current one. We investigate the total amount of effort that is likely to arise in such a situation, how effort will be spread across contests, and how likely it is that initial asymmetry will be exacerbated.
Aner Sela: Saturday October 24, 10:30-11:30
“Allocation of Prizes in Contests with Participation Constraints”
We study an all-pay auction with an exogenous minimal effort constraint where a player can participate in the contest only if his effort is equal to or higher than the minimal effort constraint. Contestants are privately informed about a parameter (ability) affecting their cost of effort. The designer decides about the size and the number of prizes. He can allocate prizes such that the contestant with the highest effort wins a prize which is higher or equal to the prize of the contestant with the second highest effort and so on. The designer maximizes either the expected total effort or the expected highest effort. In both cases, independent of the players' distribution of abilities, for sufficiently high values of the minimum effort constraint, the designer is indifferent between whether to allocate the entire prize sum to the contestant with the highest effort or to equally allocate the entire prize sum to all the participants. It is shown that the expected total effort as well as the expected highest effort may be higher when the entire prize is equally allocated to all the participants than when it is allocated to the contestant with the highest effort only. However, for any value of the minimum effort constraint, if the distribution of the contestants' abilities is sufficiently concave, an equal allocation of the entire prize sum to all the participants is not optimal.
Rene Kirkegaard: Saturday October 24, 11:45-12:45
“Favoritism in Asymmetric Contests: Head Starts and Handicaps”
A contest with heterogeneous contestants and incomplete information is examined. A contestant may suffer from a handicap or benefit from a head start. The former reduces the contestant's score by a fixed percentage; the latter is an additive bonus. Total effort increases if the weak contestant is favored with a head start, but not necessarily if his opponent is handicapped. When the contestants are sufficiently heterogeneous, the weak contestant should be given a head start and a handicap. It is also possible to induce higher effort and at the same time make both contestants better off ex ante.
Stergios Skaperdas (co-authored with Samarth Vaidya): Saturday October 24, 13:45-14:45
"Cognitive Policy Capture"
We derive conditions under which a policy-maker chooses a policy because he or she is persuaded of its correctness even though the main factor in persuasion is the amount of resources expended by lobbyists.
Karl Wärneryd: Saturday October 24, 15:00-16:00
"Democracy, Inequality, and International Conflict"
We consider defense spending decisions in democracies when a nation interacts strategically with other nations. We note that there are potential delegation effects, in the sense that the median voter may prefer somebody else to make the defense decision. Such delegation may be achieved through franchise extension or the formation of alliances with other nations.
Nils-Henrik M. von der Fehr (with María-Ángeles de Frutos and Natalia Fabra): Saturday October 24, 16:00-17:00
"Investment Incentives and Market Design"
The purpose of this paper is to understand how market design affects market performance through its impact on investment incentives. For this purpose, we study a two-stage game in which firms choose their capacities under demand uncertainty prior to competing in the product market. We analyse a number of different market design elements, including (i) two commonly used auction formats, the uniform-price and discriminatory auctions, (ii) price- caps and (iii) bid duration. We find that, although the discriminatory auction tends to lower prices, this does not imply that investment incentives at the margin are poorer; indeed, under reasonable assumptions on the shape of the demand distribution, the discriminatory auction induces (weakly) stronger investment incentives than the uniform-price format. The relative supremacy of the discriminatory format regarding prices is preserved even when it leads to more concretated market structures.