Emotional Leadership in an Intergroup Conflict Game Experiment

This article introduces leadership in a Contest group contest game. More specifically, it studies the effects of leading-by-example and emotional leadership in a behavioral experiment, but also theoretically. In this experiment leaders lead-by-example by contributing publicly to the contest before followers and can show emotional leadership by selecting basic emotions that are subsequently evoked in their followers. Emotions are evoked in this study by showing specially selected and validated movie clips.Overall, we find that leaders contribute more than followers and that leading-by-example as well as emotional leadership have a significant effect on the behavior of followers. Although, leaders do not always use these mechanisms wisely. This behavior contrasts strikingly with the Nash equilibrium predictions. Furthermore, we find that both leaders and followers contribute more then predicted by a standard Nash equilibrium. These results are shown to be in line with the affective tie model of van Dijk and van Winden (1997), the imitation model of Cartwright and Patel (2010), and a psychological costs model of Dufwenberg, Gächter, and Hennig-Schmidt (2011).     

Non-exclusive group contests: An experimental analysis

We experimentally study a non-exclusive group contest in which contestants actively participate in multiple groups simultaneously. We compare the results of this contest to those of an exclusive group contest in which each contestant belongs to a single group. In contrast to theoretical predictions, we find that the non-exclusive group contest generates less aggregate effort than the equivalent exclusive group contest. We hypothesize that groups in the non-exclusive group contest are less responsive to their rival group’s effort than those in the exclusive group contest. Likewise, on the individual level, players in the non-exclusive group contest are more likely to free-ride on their group members’ contributions. Our data indicate that non-free-riders in the non-exclusive group contest are more likely, over time, to allocate their effort toward a single group. This finding is consistent with previous findings that players facing a complex strategy space tend to focus on specific winning combinations. Moreover, given that players are affected by their group members’ contributions, they tend to exert their effort primarily toward a single group. Taken together, our findings suggest that a non-exclusive group contest may evolve, over time, into an exclusive group contest.     

SIMULTANEOUS DECISION‐MAKING IN COMPETITIVE AND COOPERATIVE ENVIRONMENTS

We experimentally investigate simultaneous decision‐making in two contrasting environments: one that encourages competition (lottery contest) and one that encourages cooperation (public good game). We find that simultaneous participation in the public good game affects behavior in the contest, decreasing sub‐optimal overbidding. Contributions to the public good are not affected by participation in the contest. The direction of behavioral spillover is explained by differences in strategic uncertainty and path‐dependence across games. Our design allows us to compare preferences for cooperation and competition. We find that in early periods, there is a negative correlation between decisions in competitive and in cooperative environments. (JEL C72, C91)     

Voting rules and efficiency in one-dimensional bargaining games with endogenous protocol

We analyze a rent-seeking contest that determines the bargaining protocol in a one-dimensional bargaining game, where agents preferences over social outcomes are single-peaked. We relate the incentives of agents to make unproductive and costly efforts/investments to the quota rules that are required to implement agreements. When the contest assigns persistent recognition probabilities, we find that simple majority minimizes the total investments and, hence, inefficiency. In case that the contest recurs each period, multiple equilibria exist with the particularity that in each equilibrium only one agent controls the agenda of the bargaining process.     

CONTEST DESIGN: AN EXPERIMENTAL INVESTIGATION

This paper experimentally compares the performance of four simultaneous lottery contests: a grand contest, two multiple prize settings (equal and unequal prizes), and a contest which consists of two subcontests. Consistent with the theory, the grand contest generates the highest effort levels among all simultaneous contests. In multi‐prize settings, equal prizes produce lower efforts than unequal prizes. The results also support the argument that joint contests generate higher efforts than an equivalent number of subcontests. Contrary to the theory, there is significant over‐dissipation. This over‐dissipation can be partially explained by strong endowment size effects. Subjects who receive higher endowments tend to over‐dissipate, whereas such over‐dissipation disappears when the endowments are lower. This behavior is consistent with the predictions of a quantal response equilibrium. We also find that less risk‐averse subjects over‐dissipate more. (JEL C72, C91, D72)     

Contest with attack and defense: does negative campaigning increase or decrease voter turnout?

There are two ways of winning a competition, by increasing one’s own chances of winning or by decreasing those of one’s opponents. I consider a model of contest with attack and defense and propose an application to negative political campaigns, where two candidates choose between disparaging their opponent or valorizing their own image. I provide sufficient conditions for the existence and uniqueness of the symmetric Nash equilibrium of the contest game. Through this model, I then contribute to the controversy concerning the effect of negative campaigning on voter turnout.     

Exploring the underpinnings of impaired strategic decision-making under stress

The present study sought to examine the underpinnings of impaired strategic decision-making under stress. In contrast to previous laboratory-based research, we conducted a quasi-experiment in a real life stress situation. Specifically, we used the beauty contest game and compared the performance of a group of participants who were exposed to a real-life stressor (waiting to attend an exam at a university class) with a control group of participants who were not exposed to stress (waiting to attend a regular lecture at a university class). Furthermore, about half of the participants were instructed to write down what they believed another participant had assumed the average number in the beauty contest game to be and which target number she (or he) had chosen accordingly. The results showed that stress impaired strategic reasoning in the beauty contest game. Importantly, even when only including participants who understood the rules of the game in the analyses, stress still increased the numbers chosen in the beauty contest. Furthermore, we found that participants in the stress condition were significantly less likely to base their chosen number on their belief about other players’ choices. Hence, stress not only impairs understanding of the math behind the beauty contest game but also the degree of strategizing per se.     

WHY ZERO TOLERANCE OF MISCONDUCT IS UNDESIRABLE IN CONTESTS

Competition can foster misconduct in any circumstance where the organizer of a contest cannot perfectly monitor contestants' actions or when doing so is prohibitively costly. Although misconduct comprises all actions that are contrary to the interest of the organizer, it is not necessarily the case that it is optimal to prohibit all such behavior. In this paper, we determine the equilibrium level of misconduct chosen by players in a symmetric rank‐order tournament between two competitors in which the organizer tolerates some level of misconduct. In addition to showing that zero tolerance may not minimize the level of misconduct in equilibrium, we show that there exists a range of tolerated misconduct where a symmetric mixed strategy equilibrium exists with players cheating (i.e., misconduct above the tolerated level) with some probability. When the gain from misconduct is uncertain and unknown the contest organizer faces a tradeoff: tolerating more misconduct will reduce such behavior when the state of temptation is high, but increase it when temptation is low. (JEL J33, K42)     

Experiments with the Traveler��s Dilemma: welfare, strategic choice and implicit collusion

This article investigates behavior in the Traveler??s Dilemma game and isolates deviations from textbook predictions caused by differences in welfare perceptions and strategic miscalculations. It presents the results of an experimental analysis based on a 2?×?2 design where the own and the other subject??s bonus?Cpenalty parameters are changed independently. We find that the change in own bonus?Cpenalty alone entirely explains the effect on claims of a simultaneous change in one??s own and the other??s bonus?Cpenalty. An increase in the other subject??s bonus?Cpenalty has a significant negative effect on claims when the own bonus?Cpenalty is low, whereas it does not have a significant effect when the own bonus?Cpenalty is high. We also find that expected claims are inconsistent with actual claims in the asymmetric treatments. Focusing on reported strategies, we document substantial heterogeneity and show that changes in choices across treatments are largely explained by risk aversion.     

A noncooperative marriage model with remarriage

I propose a noncooperative marriage model that explicitly accommodates the possibility of endogenous exit and remarriage, and where marriages are of variable quality. The fundamental innovation is that the remarriage decision is infinitely repeated and the problem is fully stationary, reflecting the contemporary reality in marriage markets. I show that cooperative behavior within marriage is possible in subgame perfect equilibrium both in a setting where marriage quality is independently drawn and in a setting with persistent spouse-specific characteristics and an evolving marriage market quality. I show that spouses engage in cooperative behavior most easily when they have intermediate patience levels, which is a non-standard but intuitive game theoretic result in this setting. This model also contributes to the game theory literature by proposing another avenue for sustained cooperation in a repeated prisoner’s dilemma with endogenous exit: randomness in payoff streams.     

Conflict resolution through voluntary provision of property protection

This paper reports the results of an experimental test of Nash equilibrium predictions of voluntary provision of property protection in a contest with an endogenously determined prize. The experiment investigates whether the mechanism of allowing irreversible contributions to security prior to choices over production and conflict induces positive provision of property protection due to the strategic effect on conflict, resulting in greater production. We find robust evidence that contributions to security increase with sequential decision-making, resulting in less conflict. However, there is no evidence that production increased. There is evidence larger groups resulted in less property protection and greater conflict.     

Majority voting solution concepts and redistributive taxation

Strong assumptions are usually needed to guarantee the existence of a Condorcet winner in majority voting games. The theoretical literature has developed various solution concepts to accommodate the general absence of Condorcet winner, but very little is known on their economic implications. In this paper, I select three such concepts (the uncovered set, the bipartisan set and the minmax set), defined as game-theoretical solution concepts applied to a Downsian electoral competition game. These concepts are then computed by means of simulations in a simple model of purely redistributive taxation, where factor supply varies with net factor rewards. All three concepts give rather sharp predictions and are not too sensitive to small variations of the preference profiles. Received: 29 December 1997/Accepted: 26 August 1999     

LIVING IN TWO NEIGHBORHOODS—SOCIAL INTERACTION EFFECTS IN THE LABORATORY

Field evidence suggests that people belonging to the same group often behave similarly, that is, behavior exhibits social interaction effects. We conduct a laboratory experiment that avoids the identification problem present in the field and allows us to study the behavioral logic of social interaction effects. Our novel design feature is that each subject is simultaneously a member of two randomly assigned and identical groups where only members (“neighbors”) are different. We study behavior in a coordination game with multiple equilibria and a public goods game, which has only one equilibrium in material payoffs. We speak of social interactions if the same subject at the same time makes group‐specific decisions that depend on their respective neighbors' decisions. We find that a majority of subjects exhibit social interaction effects both when the game has multiple equilibria in material payoffs and when it only has one equilibrium. (JEL C91, H41, K42, H26)     

Structural Characteristics of Video Lotteries: Effects of a Stopping Device on Illusion of Control and Gambling Persistence

Two studies investigated the effects of a video lottery terminal stopping device on gamblers thoughts and behavior. This structural characteristic allows players to voluntarily stop the spinning of the reels. The first study investigated the effect of this device on the development of illusions of control. It was predicted that players using the stopping device would believe that (1) symbols displayed could differ depending on when the game is stopped, (2) there is a possibility of controlling the outcome of the game, (3) skills may be a factor influencing the results, and finally (4) a stopping device would improve the probability of personal success (i.e., developing the illusion of control). The second study aimed to further evaluate the effects of the stopping device on gambling behavior. It was hypothesised that using the stopping device would encourage players to increase the number of games played in a session. Results confirmed all predictions and showed that offering a stopping device on video lottery terminals modifies gamblers cognition and behavior. The theoretical and practical implications of these results are discussed in the context of responsible gambling policies.     

Catalog competition: Theory and experimental evidence

This paper compares the standard location-then-pricing Hotelling duopoly with a catalog competition game in which firms simultaneously decide locations and prices. We consider a three-location space and continuous pricing and fully characterize the unique symmetric equilibrium. In both games, firms employ mixed strategies, producing a mainstream product more often than a specialized one. In the catalog game, prices are always above the marginal cost of production, whereas in the sequential model, prices converge to the marginal cost when firms produce the same variety. We experimentally test our theoretical predictions in the laboratory, finding strong evidence in favor of most of them.     

Oligopolization in collective rent-seeking

In this paper we discuss the issue of when oligopolization in collective rent-seeking occurs, that is, when some groups retire from rent-seeking. A complete characterization of the pure-strategy Nash equilibrium in a collective rent-seeking game among m (≥2) heterogeneous groups is derived. The conditions of oligopolization are derived by using this result and related to the works of Nitzan [9, 10] and Hillman and Riley [3]. Also, the subgame perfect equilibrium of a simple two-stage collective rent-seeking game (Lee [7]) is fully characterized. In this game, it is confirmed that no group retires from the contest in the second stage and oligopolization never occurs. An example of the two-stage collective rent-seeking game with monitoring costs is devised to show the possibilities of oligopolization. Received: 21 September 1999/Accepted: 27 March 2001     

Does generosity generate generosity? An experimental study of reputation effects in a dictator game

Previous experimental literature on reputation studies its effects in environments where they are often confounded with strategic behavior. This paper explores how information about the paired subject’s previous action affects one’s own behavior in a non-strategic environment of a dictator game. The experiment consists of two treatments in which dictators can give money to the paired player: one where the recipient is a stranger and the other where the dictator has information on the recipient’s reputation. The data provide evidence that on average the dictators send more money to recipients with a reputation for being generous than to recipients with no reputation. The results contribute to our understanding of how impulses towards generous (or selfish) behavior might arise.     

CONTESTS WITH DRAWS: AXIOMATIZATION AND EQUILIBRIUM

We introduce and axiomatize a class of single‐winner contest success functions that embody the possibility of a draw. We then analyze the game of contest that our success functions induce, having different prizes delivered in the occurrence of a win and a draw. We identify conditions for the existence and uniqueness of a symmetric interior Nash equilibrium and show that equilibrium efforts and equilibrium rent dissipation can be larger than in a Tullock contest (with no possibility of a draw) due to increased competition even if the draw‐prize is null. These results suggest that a contest designer may profit from introducing the possibility of a draw. Finally, we show that this approach naturally extends to multiprize contests with multiple draws across different subsets of the set of players. (JEL C72, D72, D74)     

The robustness of ‘enemy-of-my-enemy-is-my-friend’ alliances

We examine a three-player, three-stage game of alliance formation followed by multi-battle conflict. There are two disjoint sets of battlefields, each of which is associated with a player who competes only within that set. The common enemy competes in both sets of battlefields. An ‘enemy-of-my-enemy-is-my-friend’ alliance forms when the two players facing the common enemy agree on a pre-conflict transfer of resources among themselves. We examine the case in which the players may commit to binding ex post transfers (alliances with full commitment) and the case in which ex post transfers are not feasible (self-enforcing alliances). Models that utilize the lottery contest success function typically yield qualitatively different results from those arising in models with the auction contest success function. However, under both contest success functions, alliances with full commitment result in identical alliance transfers for all parameter configurations, and self-enforcing alliances yield identical transfers over a subset of the parameter space. Our results, thus, provide a partial robustness result for ‘enemy-of-my-enemy-is-my-friend’ alliances.     

The Politics of Randomness

Recent analysis of public policy is based on elaborate political-economic models. A major advantage of these useful models is that they have micro-foundations. Their main shortcomings are that they are usually based on drastic simplifications regarding the institutional setting and, more importantly, that the results they yield are not robust to the assumptions regarding the institutional setting, the policy space or the agents’ preferences. An alternative reduced-form modeling is the public-policy lobbying contest. This model can be applied to public-policy determination in representative democracies. However, its main drawback is that the notion of contest success function (CSF), a crucial component of the contest model, does not have micro-foundations and, therefore, the random behavior of the government seems ad-hoc. In the present paper we propose a partial micro-foundation for the public-policy contest. The possible rationalization of random government behavior is illustrated in the case of the most commonly studied CSFs: the function associated with the all-pay auction and Tullock’s lottery logit functions. We also clarify how stake asymmetry, lobbying-skill asymmetry and return to lobbying effort determine the relative desirability, from the government’s point of view, of these CSFs.