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Inter and intra-group conflicts as a foundation for contest success functions

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  • Pelosse, Yohan

Abstract

This paper introduces a notion of partitioned correlated equilibrium that extends Aumann's correlated equilibrium concept (1974, 1987). This concept captures the non-cooperative interactions arising simultaneously within and between groups. We build on this notion in order to provide a foundation for contest success functions (CSFs) in a game wherein contests arise endogenously. Our solution concept and analysis are general enough to give a foundation for any model of contest using standard equilibrium concepts like e.g., Nash, Bayesian-Nash or Perfect-Nash equilibria. In our environment, popular CSFs can be interpreted as a list of equilibrium conjectures held by players whenever they contemplate deviating from the ``peaceful outcome'' of the ``group formation game''. Our setup allows to relate the form of prominent CSFs with some textbook examples of quasi-linear utility functions, social utility functions in the spirit of Fehr and Schmidt (1999) and non-expected models of utility a la Quiggin (1981, 1982). We also show that our framework can accommodate situations in which agents cannot correlate their actions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31468.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:31468

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Keywords: Contest success functions; Correlated equilibrium; Inter and intra-group conflicts; Induced contests;

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  1. R. Aumann, 2010. "Correlated Equilibrium as an expression of Bayesian Rationality," Levine's Bibliography 513, UCLA Department of Economics.
  2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 817-868, August.
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  18. Aumann, Robert J., 1974. "Subjectivity and correlation in randomized strategies," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 67-96, March.
  19. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 3(4), pages 323-343, December.
  20. Jack Hirshleifer, 1989. "Conflict and rent-seeking success functions: Ratio vs. difference models of relative success," Public Choice, Springer, Springer, vol. 63(2), pages 101-112, November.
  21. Che, Yeon-Koo & Gale, Ian, 2000. "Difference-Form Contests and the Robustness of All-Pay Auctions," Games and Economic Behavior, Elsevier, Elsevier, vol. 30(1), pages 22-43, January.
  22. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, Econometric Society, vol. 51(4), pages 1047-64, July.
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  24. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, Elsevier, vol. 14(1), pages 90-123, May.
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