Pelosse, Yohan (2011): Inter and intragroup conflicts as a foundation for contest success functions.

PDF
MPRA_paper_31468.pdf Download (291kB)  Preview 
Abstract
This paper introduces a notion of partitioned correlated equilibrium that extends Aumann's correlated equilibrium concept (1974, 1987). This concept captures the noncooperative 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, BayesianNash or PerfectNash 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 quasilinear utility functions, social utility functions in the spirit of Fehr and Schmidt (1999) and nonexpected models of utility a la Quiggin (1981, 1982). We also show that our framework can accommodate situations in which agents cannot correlate their actions.
Item Type:  MPRA Paper 

Original Title:  Inter and intragroup conflicts as a foundation for contest success functions 
Language:  English 
Keywords:  Contest success functions; Correlated equilibrium; Inter and intragroup conflicts; Induced contests 
Subjects:  D  Microeconomics > D7  Analysis of Collective DecisionMaking > D74  Conflict; Conflict Resolution; Alliances C  Mathematical and Quantitative Methods > C7  Game Theory and Bargaining Theory > C72  Noncooperative Games 
Item ID:  31468 
Depositing User:  Yohan Pelosse 
Date Deposited:  12. Jun 2011 15:16 
Last Modified:  16. Feb 2013 14:09 
References:  Alcalde, J., Dahm, M., 2007. Tullock and Hirshleifer: a meeting of the minds. Rev Econ Des 11, 101124. Aumann, R., 1974. Subjectivity and correlation in randomized strategies. J Math Econ. 1, 6796. Aumann, R., 1987. Correlated equilibrium as an expression of Bayesian rationality. Econometrica. 55, 118. Baik, K.H., 1998. Differenceform contest success functions and effort levels in contests. Eur J Polit Econ. 14, 685701. Baye, M.R., Hoppe, H.C., 2003. The strategic equivalence of rentseeking, innovation, and patentrace games. Games Econ Behav. 44, 217226. Bevia, C., Corchon L., 2010. Peace agreements without commitment. Games Econo Behav. 68, 469487. Bloch, F., 1996. Sequential formation of coalitions in games with externalities and fixed payoff division, Games Econ Behav 14, 90123. Bloch, F., SánchezPagés, S., Soubeyran, R., 2006. When does universal peace prevail? Secession and group formation in conflict. Econ Gov. 7(1) 329. Che, Y.K., Gale, I., 2000. Differenceform contests and the robustness of allpay auctions. Games Econ Behav. 30, 2243. Clark, D., Riis, C., 1998. Contest success functions: An extension. Econ. Theory. 11, 201204. Corchon., 2007. The theory of contests: a survey. rev Econ Design. 11, 69100. Corchon, L., Dahm, M., 2009. Welfare maximizing contest success functions when the planner cannot commit. , J Math Econ. (forthcoming) Corchon, L., Dahm, M., 2010. Foundations for contest success functions. Econ Theory. 43, 8198. Epstein, G.S., Nitzan, S.: The politics of randomness. Soc Choice Welf 27, 423433 (2006) Esteban, J.M., Ray, D., 1999. Conflict and distribution. J Econ Theory. 87, 379415. Fehr, E., Schmidt, K.M., 1999. A theory of fairness, competition, and cooperation. Quart J Econ. 114(3), 817868. Fullerton, R L., McAfee R. Preston., 1999. Auctioning entry into tournaments, J Polit Econ. 107(3), 573605. Fu Q., Lu J., 2011. A MicroFoundation for Generalized MultiPrize Contests: A Noisy Ranking Perspective. Soc Choice Welf, forthcoming Grossman, H.I., Kim M., 1995. Swords or plowshares? A theory of the security of claims to property. J Polit Econ. 103:1275288. Hart, S., Kurz M., 1983. Endogenous formation of coalitions, Econometrica. 51, 10471064. Hillman, A.L., Riley, J.G., 1989. Politically contestable rents and transfers. Econ Polit 1(1), 1739. Hirshleifer, J., 1989. Conflict and rentseeking success functions: ratio vs. difference models of relative success. Public Choice. 63, 101112. Hirshleifer, J., 1995. Anarchy and its breakdown. J Polit Econ. 103, 2652. Jackson M., Massimo M., 2009. Strategic militarization, deterrence and war between nations. Quart J Polit Science. 4, 279313. Konrad, K., 2009. Strategy and dynamics in contests. Oxford, UK: Oxford University Press. Muthoo, A., 2004. A model of the origins of basic property rights, Games Econ Behav. 288312. Nitzan, S., 1994. Modelling rentseeking contests. Eur. J. Polit. Econ. 10, 4160. Quiggin, J., 1981. Risk perception and risk aversion among australian farmers, Australian Jour Agr Econ. 25, 160169. Quiggin, J., 1982. A theory of anticipated utility. J Econ Behav Org. 3, 323343. Ray., D, Vohra, R., 1997. Equilibrium binding agreements. J Econ Theory. 73 3078. Schelling, T., 1960. The Strategy of Conflict, Harvard University Press, Cambridge, Massachusetts. Schelling, T., 1978. Micromotives and Macrobehavior, New York: Norton. Skaperdas, S., 1992. Cooperation, conflict, and power in the absence of property rights. Am Econ Rev 82:720739. Skaperdas, S., 1996. Contest success functions. Econ Theory 7, 283290. Tullock, G., 1980. Efficient rent seeking. In: Buchanan, J., Tollison, R., Tullock, G. (eds.) Toward a theory of the rent seeking society. College Station: Texas A\&M University Press, pp. 97112. Tversky, A., Kahneman, D., 1992. Advances in prospect theory: Cumulative representation of uncertainty, J Risk Uncertainty 5(4), 297323. 
URI:  http://mpra.ub.unimuenchen.de/id/eprint/31468 