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Asymmetry And Collusion In Infinitely Repeated Contests

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  • J. Atsu Amegashie

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    (Department of Economics, University of Guelph)

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    Abstract

    I show that in an infinitely repeated contest, collusion is easier to sustain when the players are more equal than when they are less equal. Therefore, aggregate rent-seeking expenditures may be lower when the contestants are more equally matched. This is in sharp contrast to the standard result in static rent-seeking contests where increasing asymmetries between players reduce aggregate expenditures. I also discuss how this result has implications for signaling in contests with incomplete information.

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    Bibliographic Info

    Paper provided by University of Guelph, Department of Economics and Finance in its series Working Papers with number 0509.

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    Length: 10 pages
    Date of creation: 2005
    Date of revision:
    Handle: RePEc:gue:guelph:2005-9

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    Postal: Guelph, Ontario, N1G 2W1
    Phone: (519) 824-4120 ext. 53898
    Fax: (519) 763-8497
    Web page: https://www.uoguelph.ca/economics/
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    Keywords: aggregate expenditures; asymmetry; collusion; folk theorem.;

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    References

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    1. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
    2. Richard Cornes & Roger Hartley, 2002. "Asymmetric Contests with General Technologies," Keele Economics Research Papers KERP 2002/22, Centre for Economic Research, Keele University.
    3. Gil Epstein & Shmuel Nitzan, 2006. "Reduced prizes and increased effort in contests," Social Choice and Welfare, Springer, vol. 26(3), pages 447-453, June.
    4. William Stein & Amnon Rapoport, 2005. "Symmetric two-stage contests with budget constraints," Public Choice, Springer, vol. 124(3), pages 309-328, September.
    5. Rick Harbaugh & Tilman Klumpp, 2004. "Early Round Upsets and Championship Blowouts," Working Papers 2004-09, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    6. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
    7. Skaperdas, Stergios & Syropoulos, Constantinos, 1996. "Can the shadow of the future harm cooperation?," Journal of Economic Behavior & Organization, Elsevier, vol. 29(3), pages 355-372, May.
    8. Groh, Christian & Moldovanu, Benny & Sela, Aner & Sunde, Uwe, 2003. "Optimal Seedings in Elimination Tournaments," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 140, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
    10. Kurt Annen, 2006. "Property Rights Assignment: Conflict and the Implementability of Rules," Economics of Governance, Springer, vol. 7(2), pages 155-166, May.
    11. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
    12. Moldovanu, Benny & Sela, Aner, 2006. "Contest architecture," Journal of Economic Theory, Elsevier, vol. 126(1), pages 70-96, January.
    13. Johannes H�rner & Nicolas Sahuguet, 2007. "Costly Signalling in Auctions -super-1," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 173-206.
    14. Halvor Mehlum & Karl Moene, 2006. "Fighting against the odds," Economics of Governance, Springer, vol. 7(1), pages 75-87, 01.
    15. Amegashie, J Atsu, 1999. " The Design of Rent-Seeking Competitions: Committees, Preliminary and Final Contests," Public Choice, Springer, vol. 99(1-2), pages 63-76, April.
    16. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
    17. Gradstein, Mark & Konrad, Kai A, 1999. "Orchestrating Rent Seeking Contests," Economic Journal, Royal Economic Society, vol. 109(458), pages 536-45, October.
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