TO DETER OR TO MODERATE? ALLIANCE FORMATION IN CONTESTS WITH INCOMPLETE INFORMATION

We consider two players' choice about the formation of an alliance ahead of conflict in a framework with incomplete information about the strength of the potential ally. When deciding on alliance formation, players anticipate the self‐selection of other players and the informational value of own and other players' choices. In the absence of these signaling effects, strong players have an incentive to stand alone, which leads to a separating equilibrium. This separating equilibrium can be destabilized by deception incentives if beliefs are updated on the basis of endogenous alliance formation choices. Weak players may find it attractive to appear strong in order to deter competitors from positive effort choices. Strong players may find it attractive to appear weak in order to give their competitors a false sense of security and then beat them with little effort. Moreover, appearing weak allows players to free‐ride when alliances are formed. (JEL D72, D74)     

RANKING DISCLOSURE POLICIES IN ALL‐PAY AUCTIONS

In this paper, we study information disclosure policies in all‐pay auctions with incomplete information. Two symmetric players have either high or low private value. The contest organizer observes players' values ex post, and can commit ex ante to four different symmetric information policies exhaustively: She can fully disclose or conceal the players' types, and she can disclose their types if and only if when both are high or if and only if when both are low. We characterize the unique equilibriums, and completely rank the four policies by various criteria. We find the full concealment policy extracts highest aggregate expected effort, followed by the policy of disclosing types if and only if when both are high. The policy of disclosing types if and only if when both are low induces least aggregate expected effort. Players enjoy highest expected payoffs under the policy of disclosing types if and only if when both are low; the other three policies yield the same expected payoffs to players. In terms of prize allocation efficiency, the full concealment policy is ranked highest and the full disclosure policy is ranked lowest. In between, the other two policies' rankings depend on the probability of high type. (JEL C72, D44, D82, D83, J48).     

Contests with group-specific public-good prizes

We examine the equilibrium effort levels of individual players and groups in contests in which n groups compete to win a group-specific public-good prize, the individual players choose their effort levels simultaneously and independently, and the probability of winning for each group depends on the groups’ effort levels. In the basic model, we show that, in each group, only the highest-valuation players expend positive effort and the rest expend zero effort; there is underinvestment in the contest for the group as a whole. Next, in the main model in which the players are budget-constrained, we show that low-valuation players free ride on high-valuation players’ contributions, not vice versa, but the free-rider problem is “alleviated” as compared with the basic model.     

ENDOGENOUS TIMING IN CONTESTS WITH DELEGATION

We study two‐player contests in which each player hires a delegate, and the delegates decide endogenously when to expend their effort. First, we look closely at the delegates' decisions on when to expend their effort, given contracts between the players and the delegates, and look at the players' decisions on their contracts. Then, we compare the outcomes of the endogenous‐timing framework with those of the simultaneous‐move framework. We show that the higher‐valuation player offers her delegate greater contingent compensation than her opponent, the delegate of the higher‐valuation player chooses his effort level after observing his counterpart's, the equilibrium expected payoff of the delegate of the higher‐valuation player is greater than that of his counterpart, and economic rent for each delegate exists. We show that, in the endogenous‐timing framework, each player offers her delegate better contingent compensation, each delegate's expected payoff is greater, and each player's expected payoff is smaller, as compared with the simultaneous‐move framework. (JEL D72)     

Labor Market Information and Selection in a Local Restaurant Industry: The Tenuous Balance Between Rewards,Commitments, and Costs

The restaurant industry is characterized as having high turnover, skill homogeneity, and distrust of standard sources of labor market information. We examine how in this context employers seek and evaluate information on potential job candidates (extensive search) and the hiring criteria they use to select new employees (intensive search). We find that employers in the restaurant sector are often passive or reactive about recruitment, distrust standard sources of information, and reject the use of educational credentials and work experience as hiring criteria. They do, however, find ways to signal workplace information to potential job candidates, develop schemes to gather reliable information, and closely evaluate job history data when hiring. Some develop signaling strategies to alert potential employees that their stores are sufficiently different from apparently similar stores to make them unusually attractive places to work. To help secure a sufficiently motivated work force, managers eschew standard measures of potential productive capacity or skills and adopt instead indicators of a modicum of employee motivation. Even under conditions of high turnover, skill homogeneity, and distrusted information, employers find ways to secure effort and commitment from potentially recalcitrant employees.     

A limit approaching pop-up message reduces gambling expenditures,except among players with a financially focused self-concept

Responsible gambling (RG) tools that guide electronic gaming machine (EGM) players to set a pre-set money limit on their gambling expenditures are known to reduce excessive gambling. However, not all EGM players who use a limit-setting RG tool will adhere to their limit. We hypothesized that limit adherence is facilitated by informing players that their limit is approaching (and when their limit is reached), but undermined by a financially focused self-concept (FFS). Accordingly, EGM players (N = 88) were provided seed funds to gamble with on a slot machine in a simulated virtual reality casino. They were randomly assigned to receive a limit reminder both when their limit was approaching and again when their limit was reached (experimental condition) or just when their limit was reached (control condition). Players in the experimental condition were more likely to stop playing before reaching their money limit compared to players in the control condition. However, this was observed among players who are low, but not high, in FFS. Unexpectedly, condition (control vs experimental) was unrelated to playing beyond the money limit and FFS did not moderate this relation. Results suggest that individual difference factors, like FFS, can undermine the utility of RG tools.     

ADDRESSING SOCIAL DILEMMAS WITH MASCOTS,INFORMATION, AND GRAPHICS

Reducing nonpoint source pollution is a complex social dilemma involving externalities, information asymmetries, and coordination problems. Using a laboratory experiment, this research investigates how mascots, public information, and data visualization can improve collective group behavior to address a social dilemma. Results show that groups reduce pollution in the experiment when a community mascot expresses negative emotions in response to poor water quality outcomes. Additionally, groups pollute less when they are provided public information about water quality, and abatement is greater when feedback is negatively framed. This study demonstrates how novel nonmonetary incentives can be used to achieve a collective environmental goal. (JEL D79, Q25, Q52, Q53, D83)     

DO RENT‐SEEKING GROUPS ANNOUNCE THEIR SHARING RULES?

We study collective rent seeking between two groups in which each group has the option of releasing or not its sharing‐rule information. First, we show that the case where both groups release their sharing‐rule information never occurs in equilibrium; when the players are unevenly matched, one group releases its sharing‐rule information and the other does not. Then, we select the Pareto‐superior equilibrium when the players are unevenly matched. We show that, in this selected equilibrium, the underdog releases its sharing‐rule information, and the favorite does not; thus, the underdog becomes the leader, and the favorite the follower (JEL D72).     

PRIZE SCARCITY AND OVERDISSIPATION IN ALL‐PAY AUCTIONS

We compare bidding behavior in complete information all‐pay auction experiments that vary in the prizes and number of players. We confirm the observation from prior single‐prize experiments that there is overbidding relative to equilibrium predictions. Our primary results are that increasing the number of prizes and players proportionally does not reduce overbidding but increasing the number of prizes with a fixed number of players eliminates overbidding. We conclude that the overbidding phenomenon is related to the scarcity of the prize. We provide new theoretical results on the multi‐prize logit equilibrium, and our experimental results are qualitatively consistent with logit equilibrium predictions. (JEL D72, D91, C91, D44)     

Sequential contests with synergy and budget constraints

We study a sequential Tullock contest with two stages and two identical prizes. The players compete for one prize in each stage and each player may win either one or two prizes. The players have either decreasing or increasing marginal values for the prizes, which are commonly known, and there is a constraint on the total effort that each player can exert in both stages. We analyze the players’ allocations of efforts along both stages when the budget constraints (effort constraints) are either restrictive, nonrestrictive or partially restrictive. In particular, we show that when the players are either symmetric or asymmetric and the budget constraints are restrictive, independent of the players’ values for the prizes, each player allocates his effort equally along both stages of the contest.     

From Rats to Riches: Game Playing and the Production of the Capitalist Self

This article examines Cashflow, a board game that readers of best-seller financial success books play in order to learn the basics of investing and to enhance their financial skills. Cashflow is a fictitious market, in which players buy and sell assets with the ultimate goal of becoming “financially free.” Based on participant observation of clubs in the United States and Argentina, and drawing on the ideas of performativity and governmentality, the article focuses on four topics. First, the role of the game in establishing definitions of what it means to be rich. Second, the development of calculative tools. Third, players’ work on the self, through which they explore what may be fostering or limiting their chances of financial success. Finally, the work done by players to fit the game with reality, which allows the game to be used in different national economic contexts.     

SOCIAL HIERARCHIES: A LABORATORY STUDY ON PUNISHMENT PATTERNS ACROSS NETWORKS

We experimentally study punishment patterns across network structures, and their effect on cooperation. In a repeated public goods setting, subjects can only observe and punish their neighbors. Centralized structures (like the star network) outperform other incomplete networks and reach contribution levels like the ones observed in a complete network. Our results suggest that hierarchical network structures with a commonly observed player benefit more from sanctions not because central players punish more, but because they follow, and promote, different punishment patterns. While quasi-central players in other incomplete architectures (like the line network) retaliate, and get trapped in the vicious circle of antisocial punishment, central players in the star network do not punish back, increase their contributions when sanctioned by peripheral players, and sanction other participants in a prosocial manner. Our results illustrate recent field studies on the evolutionary prevalence of hierarchical networks. We document a network-based rationale for this positive effect in an identity-free, fully anonymous environment. (JEL C72, C91, C92, D90, H41)     

ON EQUILIBRIUM PLAYER ORDERING IN DYNAMIC TEAM CONTESTS

We study equilibrium player ordering in a dynamic all-pay contest between two teams. The contest lasts two periods, and each team consists of two players who perform in different periods on behalf of their teams. The team with the higher aggregate output wins the prize, which is a public good to its players. Each team has one stronger player and one weaker player, and the two teams can differ in their values of the prize. The teams maximize their winning odds by strategically assigning their players to different periods. We find that when the intrateam heterogeneity in player ability is not excessive, the teams would allocate their stronger players to the late positions as the “anchormen.” When both the intrateam ability gap and interteam heterogeneity in teams' values become excessively large, the team with high value always places its stronger player in the early position, who will place a large bid to preempt late competition. (JEL C7, D7, D8)     

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.     

Subject-specific performance information can worsen the tragedy of the commons: Experimental evidence

The main aim of this article is to investigate the behavioral consequences of the provision of subject-specific information in the group effort levels chosen by players in an experimental CPR game. We examine two basic treatments, one with incomplete information and the other with complete information. In the former, subjects are informed only about their own individual payoffs and the aggregate extraction effort level of the group, and in the latter they are also informed about the individual effort levels and payoffs of each subject. Given this setting, the basic question we attempt to answer is: Will the provision of subject-specific performance information (i.e. individual’s effort levels and payoffs) improve or worsen the tragedy of the commons (i.e. an exploitation effort level greater than the socially optimum level)? In order to motivate our hypotheses and explain our experimental results at the individual level, we make use of the theory of learning in games, which goes beyond standard non-cooperative game theory, allowing us to explore the three basic benchmarks in the commons context: Nash equilibrium, Pareto efficient, and open access outcomes. We use several learning and imitation theoretical models that are based on contrasting assumptions about the level of rationality and the information available to subjects, namely: best response, imitate the average, mix of best response and imitate the average, imitate the best and follow the exemplary learning rules. Finally, in order to econometrically test the hypotheses formulated from the theoretical predictions we use a random-effects model to assess the explanatory power of the different selected behavioral learning and imitation rules.     

ARE SUNK COSTS IRRELEVANT? EVIDENCE FROM PLAYING TIME IN THE NATIONAL BASKETBALL ASSOCIATION

We use playing time in the National Basketball Association to investigate whether sunk costs affect decision making. Behavioral economics implies that teams favor players chosen in the lottery and first round of the draft because of the greater financial and psychic commitment to them. Neoclassical economics implies that only current performance matters. We build on previous work in two ways. First, we better capture potential playing time by accounting for time lost to injuries or suspension. Second, we use regression discontinuity to capture changes when a player's draft position crosses thresholds. We find that teams allocate no more time to highly drafted players. (JEL L83, J23, D03)     

PLAYING FOR KEEPS: PAY AND PERFORMANCE IN THE NBA

This paper examines contract-related incentive effects using a unique dataset on individual performance and individual contracts. Evidence from professional basketball players in the 1980s and 1990s shows that individual performance improves significantly in the year before signing a multi-year contract but declines after the contract is signed. One interpretation is that workers strategically increase effort to obtain the most lucrative, multi-year contract but then reduce it once the contract is locked in. This highlights the double-edged nature of long-term contracts: good for employers when workers are fighting for them, but less so when workers have them. ( JEL J22, J3)     

A SEMI-PARAMETRIC MODEL FOR ASYMMETRIC INFORMATION IN HEALTH PLAN MARKETS

Two sources of asymmetric information in health markets are adverse selection where only individuals know their illness probability and their preventive effort to reduce illness probabilities. This effort is not observed by insurers, and thus individuals cannot be adequately compensated for their effort. I investigate whether asymmetric information plays a role in health care markets through a semi-parametric model that allows both adverse selection and preventive effort. I find that preventive effort plays a role in illness probabilities. If the United States implements universal health coverage, the currently uninsured population will exert less preventive effort, and their illness probabilities will increase. (JEL I11 , C14 )     

CHEATING IN CONTESTS

Wherever competition is used to motivate a desirable activity or productive effort it may also motivate undesirable and therefore prohibited behavior—that is, cheating—that the organizer of the contest attempts to police. For example, when workers compete for promotion, bonuses, or other rewards, they may misrepresent their output (i.e., commit fraud) or increase their output by unacceptable means (e.g., violate regulations). We show how the extent of cheating is determined by the payoffs at stake in the contest, the random component of output, probability of cheating being detected, number of contestants, and the penalty associated with being found to have cheated. We find that while greater enforcement reduces cheating, it may also reduce productive effort. We also identify how two particular aspects of enforcement, the awarding of default victories and use of correlated rather than independent audits, affect cheating behavior. (JEL J33, K42)     

The relationship between gambling and video-game playing behavior in children and adolescents

It is suggested that commercial video-games (e.g.Nintendo &Sega) and gambling activities have similar attractive features and intermittent reinforcement schedules. This research seeks to examine the nature of this relationship amongst children. One hundred and four children aged 9 to 14, from grades 4, 6, and 8, participated. A questionnaire exploring issues related to video-game playing and gambling behavior in children and adolescents was completed and a computerized blackjack game was individually administered. High frequency video-game players were compared to low frequency video-game players with respect to their gambling performance on the blackjack gambling task as well as on information gathered from the questionnaire. Of particular concern is the risk-taking strategies used by avid video-game players, whether or not children perceive gambling and video-games as involving similar amounts of skill or whether they realize that gambling is primarily a game of chance. The findings, in general, suggest that high frequency video-game players gamble more than low frequency video-game players, report that gambling makes them feel more important, and take greater risks on the blackjack gambling task although no overall differences in success were found. Males exhibited greater risk-taking tendencies on the blackjack task than females. The clinical implications of the findings are addressed.This research was partially supported by a grant from the McGill University Social Science Computer Committee.This is a revision of a paper presented at the Ninth International Conference on Gambling and Risk Taking, Las Vegas, 1994.The authors would like to thank the administration, staff, and students in T.H. Bowes, Prince Charles, Souvenir, Gerald McShane, Our Lady of Pompei, Pierrefonds Comprehensive High School, and Western Laval High School, for their participation and cooperation in this study.