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

  • Wolfgang Leininger
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    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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    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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    1. Katz, Eliakim & Nitzan, Shmuel & Rosenberg, Jacob, 1990. " Rent-Seeking for Pure Public Goods," Public Choice, Springer, vol. 65(1), pages 49-60, April.
    2. Riaz, Khalid & Shogren, Jason F & Johnson, Stanley R, 1995. " A General Model of Rent Seeking for Public Goods," Public Choice, Springer, vol. 82(3-4), pages 243-59, March.
    3. Baik, Kyung Hwan & Kim, In-Gyu & Na, Sunghyun, 2001. "Bidding for a group-specific public-good prize," Journal of Public Economics, Elsevier, vol. 82(3), pages 415-429, December.
    4. Heinrich W. Ursprung, 1990. "Public Goods, Rent Dissipation, And Candidate Competition," Economics and Politics, Wiley Blackwell, vol. 2(2), pages 115-132, 07.
    5. Burkhard Hehenkamp & Wolfgang Leininger & Alex Possajennikov, 2001. "Evolutionary Rent-Seeking," CESifo Working Paper Series 620, CESifo Group Munich.
    6. Alos-Ferrer, Carlos & Ania, Ana B., 2001. "Local equilibria in economic games," Economics Letters, 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, vol. 41(4), pages 363-367.
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