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Comparative Statics and Welfare in Heterogeneous Contests: Bribes, Caps, and Performance Thresholds

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  • René Kirkegaard

    ()
    (Department of Economics, Brock University)

Abstract

Comparative statics for contests with two privately informed and ex ante heterogeneous contestants are analyzed. Strategies and payoffs are examined and it is shown that total effort may increase when one contestant becomes weaker. The second part of the paper considers dynamic contests in which one bidder may endogenously be revealed to be weak. For example, the first contestant has the possibility of preempting the contest by paying a bribe or taking some other action. If the bribe is not paid the second contestant infers the first contestant is relatively weak or uninterested. Adding the possibility of paying a preemptive bribe decreases expected payoff for a set of types of at least one of the contestants, possibly the contestant who is ostensibly advantaged by the option to preempt the contest. However, the payoff of the recipient of the effort and the ex ante payoff of both contestants may improve.

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File URL: ftp://coffee.econ.brocku.ca/RePec/pdf/0702.pdf
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Bibliographic Info

Paper provided by Brock University, Department of Economics in its series Working Papers with number 0702.

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Length: 32 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:brk:wpaper:0702

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Keywords: Contests; All-Pay Auctions; Bribery; Caps;

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References

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  1. Che, Yeon-Koo & Gale, Ian, 2006. "Caps on Political Lobbying: Reply," MPRA Paper 6097, University Library of Munich, Germany.
  2. Amann, Erwin & Leininger, Wolfgang, 1996. "Asymmetric All-Pay Auctions with Incomplete Information: The Two-Player Case," Games and Economic Behavior, Elsevier, vol. 14(1), pages 1-18, May.
  3. Burguet Roberto & Perry Martin K, 2007. "Bribery and Favoritism by Auctioneers in Sealed-Bid Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-27, June.
  4. Arieh Gavious & Benny Moldovanu & Aner Sela, 2002. "Bid Costs and Endogenous Bid Caps," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 709-722, Winter.
  5. Kong-Pin Chen, 2004. "External Recruitment as an Incentive Device," Econometric Society 2004 Far Eastern Meetings 514, Econometric Society.
  6. PARREIRAS, Sérgio O. & RUBINCHIK-PESSACH, Anna, 2006. "Contests with heterogeneous agents," CORE Discussion Papers 2006004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Todd R. Kaplan & David Wettstein, 2006. "Caps on Political Lobbying: Comment," American Economic Review, American Economic Association, vol. 96(4), pages 1351-1354, September.
  8. Ed Hopkins & Tatiana Kornienko, 2007. "Cross and Double Cross: Comparative Statics in First Price Auctions," Levine's Bibliography 321307000000000831, UCLA Department of Economics.
  9. Chan, William, 1996. "External Recruitment versus Internal Promotion," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 555-70, October.
  10. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
  11. Kirkegaard, René & Per Baltzer Overgaard, 2005. "Pre-Auction Offers in Asymmetric First-Price and Second-Price Auctions," Economics Working Papers 2005-17, School of Economics and Management, University of Aarhus.
  12. Clark, Derek J. & Riis, Christian, 2000. "Allocation efficiency in a competitive bribery game," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 109-124, May.
  13. repec:ebl:ecbull:v:3:y:2006:i:9:p:1-8 is not listed on IDEAS
  14. Lebrun, Bernard, 1998. "Comparative Statics in First Price Auctions," Games and Economic Behavior, Elsevier, vol. 25(1), pages 97-110, October.
  15. Hopkins Ed & Kornienko Tatiana, 2007. "Cross and Double Cross: Comparative Statics in First Price and All Pay Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-25, May.
  16. Nicolas Sahuguet, 2006. "Caps in asymmetric all-pay auctions with incomplete information," Economics Bulletin, AccessEcon, vol. 3(9), pages 1-8.
  17. Lien, Da-Hsiang Donald, 1990. "Corruption and allocation efficiency," Journal of Development Economics, Elsevier, vol. 33(1), pages 153-164, July.
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