Tacit Collusion in Repeated Contests with Noise

Boudreau, James W. and Shunda, Nicholas (2015): Tacit Collusion in Repeated Contests with Noise.

Abstract

We analyze the determinants of tacit collusion in an infinitely repeated contest with noise in the contest success function. Sustaining collusion via Nash reversion strategies is easier the more noise there is, and is more difficult the larger is the contest's prize value. An increase in the contest's number of players can make sustaining collusion either more or less difficult.

• Item Type: MPRA Paper
• Language: English
• Keywords: Contest, Conflict, Collusion, Noise
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions

References

Abreu, D. (1986). Extremal Equilibria of Oligopolistic Supergames. Journal of Economic Theory, 39 (1), 191-225.

Abreu, D. (1988). On the Theory of Infinitely Repeated Games with Discounting. Econometrica, 56 (2), 383-396.

Alexeev, M., & Leitzel, J. (1991). Collusion and Rent-Seeking. Public Choice, 69 (3), 241-252.

Alexeev, M., & Leitzel, J. (1996). Rent Shrinking. Southern Economic Journal, 62 (3), 620-626.

Amegashie, J. A. (2006a). Asymmetry and Collusion in Infinitely Repeated Contests. Working Paper, University of Guelph.

Amegashie, J. A. (2006b). A Contest Success Function with a Tractable Noise Parameter. Public Choice, 126 (1-2), 135-144.

Amegashie, J. A. (2011). Incomplete Property Rights and Overinvestment. Social Choice and Welfare, 37 (1), 81-95.

Blavatskyy, P. R. (2010). Contest Success Function with the Possibility of a Draw: Axiomatization. Journal of Mathematical Economics, 46 (2), 267-276.

Cason, T. N., Masters, W. A., & Sheremeta, R. M. (2013). Winner-Take-All and Proportional-Prize Contests: Theory and Experimental Results. Working Paper, Case Western Reserve University.

Cheikbossian, G. (2012). The Collective Action Problem: Within-Group Cooperation and Between-Group Competition in a Repeated Rent-Seeking Game. Games and Economic Behavior, 74 (1), 68-82.

Dasgupta, A., & Nti, K. O. (1998). Designing an Optimal Contest. European Journal of Political Economy, 14 (4), 587-603.

Eggert, W., Itaya, J., & Mino, K. (2011). A Dynamic Model of Conflict and Appropriation. Journal of Economic Behavior & Organization, 78 (1-2), 167-182.

Friedman, J. W. (1971). A Non-Cooperative Equilibrium for Supergames. Review of Economic Studies, 38 (1), 1-12.

Grossmann, M. (2014). Uncertain Contest Success Function. European Journal of Political Economy, 33, 134-148.

Grossmann, M., Lang, M., & Dietl, H. (2011). Transitional Dynamics in a Tullock Contest with a General Cost Function. B.E. Journal of Theoretical Economics, 11 (1), Article 17.

Hillman, A. L., & Riley, J. G. (1989). Politically Contestable Rents and Transfers. Economics & Politics, 1 (1), 17-39.

Huck, S., Konrad, K. A., & Müller, W. (2002). Merger and Collusion in Contests. Journal of Institutional and Theoretical Economics, 158 (4), 563-575.

Itaya, J., & Sano, H. (2003). Exit from Rent-Seeking Contests. Japanese Economic Review, 54 (2), 218-228.

Jia, H. (2012). Contests with the Probability of a Draw: A Stochastic Foundation. Economic Record, 88 (282), 391-406.

Krähmer, D. (2007). Equilibrium Learning in Simple Contests. Games and Economic Behavior, 59 (1), 105-131.

Leininger, W., & Yang, C. (1994). Dynamic Rent-Seeking Games. Games and Economic Behavior, 7 (3), 406-427.

Linster, B. G. (1994). Cooperative Rent-Seeking. Public Choice, 81 (1-2), 23-34.

Mehlum, H., & Moene, K. (2006). Fighting Against the Odds. Economics of Governance, 7 (1), 75-87.

Rai, B. K., & Sarin, R. (2009). Generalized Contest Success Functions. Economic Theory, 40 (1), 139-149.

Shaffer, S., & Shogren, J. (2008). Infinitely Repeated Contests: How Strategic Interaction Affects the Efficiency of Governance. Regulation & Governance, 2 (2), 234-252.

Tullock, G. (1980). Efficient Rent Seeking. In Buchanan, J., Tullock, G., & Tollison, R. (Eds.), Toward a Theory of the Rent-Seeking Society, pp. 97-112. Texas A&M University Press.

Wasser, C. (2013). Incomplete Information in Rent-Seeking Contests. Economic Theory, 53 (1), 239-268.

Yang, C. (1993). Cooperation by Credible Threats: On the Social Costs of Transfer Contests Under Uncertainty. Journal of Institutional and Theoretical Economics, 149 (3), 559-578.