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Contests over Public Goods: Evolutionary Stability and the Free-Rider Problem

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  • Wolfgang Leininger
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    Abstract

    We analyze group contests for public goods by applying the solution concept of an evolutionary stable strategy (ESS). We show that a global ESS cannot exist, because a mutant free-rider can always invade group behavior successfully. There does exist, however, a unique local ESS, which we identify with evolutionary equilibrium. It coincides with Nash equilibrium, the hitherto dominant solution concept in contest theory, if and only if groups are symmetric. For asymmetric groups it always proposes a different and arguably more sensible solution than Nash equilibrium. We explore the properties of (local) ESS in detail.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2002/wp-cesifo-2002-04/713.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 713.

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    Date of creation: 2002
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    Handle: RePEc:ces:ceswps:_713

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    Keywords: contests; public goods; evolutionary stability.;

    References

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    1. Shogren, Jason F. & Riaz, Khalid & Johnson, Stanley R., 1995. "A General Model of Rent Seeking for Public Goods," Staff General Research Papers, Iowa State University, Department of Economics 5229, Iowa State University, Department of Economics.
    2. Baik, Kyung Hwan & Kim, In-Gyu & Na, Sunghyun, 2001. "Bidding for a group-specific public-good prize," Journal of Public Economics, Elsevier, Elsevier, vol. 82(3), pages 415-429, December.
    3. Katz, Eliakim & Nitzan, Shmuel & Rosenberg, Jacob, 1990. " Rent-Seeking for Pure Public Goods," Public Choice, Springer, Springer, vol. 65(1), pages 49-60, April.
    4. Burkhard Hehenkamp & Wolfgang Leininger & Alex Possajennikov, 2001. "Evolutionary Rent-Seeking," CESifo Working Paper Series, CESifo Group Munich 620, CESifo Group Munich.
    5. Heinrich W. Ursprung, 1990. "Public Goods, Rent Dissipation, And Candidate Competition," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 2(2), pages 115-132, 07.
    6. Alos-Ferrer, Carlos & Ania, Ana B., 2001. "Local equilibria in economic games," Economics Letters, Elsevier, Elsevier, vol. 70(2), pages 165-173, February.
    7. Baik, Kyung Hwan, 1993. "Effort levels in contests : The public-good prize case," Economics Letters, Elsevier, Elsevier, vol. 41(4), pages 363-367.
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    Cited by:
    1. Sina Risse, 2011. "Two-stage group rent-seeking with negatively interdependent preferences," Public Choice, Springer, Springer, vol. 147(3), pages 259-276, June.
    2. Burkhard Hehenkamp & Wolfgang Leininger & Alex Possajennikov, 2003. "Evolutionary Equilibrium in Tullock Contests: Spite and Overdissipation," Discussion Papers in Economics, University of Dortmund, Department of Economics 03_01, University of Dortmund, Department of Economics.
    3. Wolfgang Leininger, 2004. "Fending off one Means Fending off all: Evolutionary Stability in Submodular Games (new title: Fending off one means fending off all: evolutionary stability in quasi-submodular aggregative games)," CESifo Working Paper Series, CESifo Group Munich 1266, CESifo Group Munich.

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