Inter and intra-group conflicts as a foundation for contest success functions

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

Abstract

This paper introduces a notion of partitioned correlated equilibrium that extends Aumann's correlated equilibrium concept (1974, 1987). This concept captures the non-cooperative 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, Bayesian-Nash or Perfect-Nash 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 quasi-linear utility functions, social utility functions in the spirit of Fehr and Schmidt (1999) and non-expected 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
• Language: English
• Keywords: Contest success functions; Correlated equilibrium; Inter and intra-group conflicts; Induced contests
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games

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