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Does Delegation Help to Prevent Spiteful Behavior?

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  • Christian Rusche

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    Abstract

    The direct evolutionary approach according to Leininger (2003) states that players in a two player Tullock rent-seeking contest within a fi nite population behave „as if“ they were relative payoff maximizers. Accordingly contest expenditures are higher than in Nash equilibrium. The indirect evolutionary approach also predicts more aggressive behavior by the players since negatively interdependent preferences are evolutionary stable. Both players are willing to harm themselves in material terms just to harm their opponent even more. I consider that every player in the contest has to contract a delegate either using a relative contract or a no-win-nopay contract. I show that delegation once introduced is able to overcompensate all negative eff ects of negatively interdependent objective functions. But as in the case without delegation a commitment on more aggressive behavior is a dominant strategy. Nevertheless delegation endows principals with a material payoff that is equal to the payoff an individualistic player facing another individualistic player would get.

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    File URL: http://repec.rwi-essen.de/files/REP_11_270.pdf
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    Bibliographic Info

    Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0270.

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    Length: 33 pages
    Date of creation: Jul 2011
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    Handle: RePEc:rwi:repape:0270

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    Keywords: Contest; strategic delegation; spite; agency theory;

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    22. Kyung Hwan Baik, 2007. "Equilibrium Contingent Compensation in Contests with Delegation," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 986–1002, April.
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