Resumen de Essays on contests and conflicts
Anil Yildizparlak
My dissertation consists of three chapter that analyze of the behavior of decision makers and their interactions in situations where agents engage in costly effort investment in order to earn a prize such as property rights, natural resources, market shares, etc. This analysis allows competition between economic agents when the property rights are not clearly defined, imperfectly enforced, or absent completely by design or naturally. As property rights are absent in various economic environments, my dissertation allows applications of political economy, litigation, sports, etc. First chapter is a joint work with my supervisor Luis C. Corchón and it is a published work in Journal of Economic Behavior and Organization. Our paper concentrates on the Political Economy implications of contests and analyzes a conflict over a resource between two contestants that differ in effectiveness of employing their investments on forces. We consider, for the cases of complete and asymmetric information, a pre-existent resource distribution and we analyze the effects of that distribution on sustaining peace. We find that under complete information there is always some distribution that achieves peace. If the contestants are similar, the set of such distributions are larger. Thus, peace may be achieved rather simply. Under asymmetric information we show that if the asymmetric information is small there may be no distribution of the resource that sustains peace in equilibrium. Thus, when there is asymmetric information or misinterpretation of the strength of the other contestant, the cheap-talk game of declaring war has consequences that lead to war even if the contestants have the chance of obtaining a part of the resource under conflict without aggression. Second chapter focuses on the possibility of ties in contests in general. The possibility of a tie may naturally be existent in the contest such as an impasse in a familitary conflict, the imperfect credibility of the prize granting authority in lobbying. It may also be imposed by design as in sport events such as football, chess, etc and promotional contests where denying promotion too all is a granted right of an employer. My paper introduces a new functional form allowing the possibility of a draw in a contest as a function of the expenses spent by the contestants and analyses the game induced by assigning a non-negative price for the outcome of the tie. I also build a dataset from four major football leagues of Europe including information on market values of the teams, and the result of each match for ten seasons. I use this data as a first assessment of the empirical performance of contest success functions for ties in the literature. According to my functional form, probability of a tie reaches a maximum whenever contestants exert equal amounts of effort regardless of the magnitude of these efforts. It increases when a player with less effort increases his effort, and decreases otherwise. In the unique equilibrium, players spend more for the contest with ties compared to the amount they spend for the contest without ties, even if the prize obtained in case of a tie is equivalent to losing the contest. This result implies that players compete more even if their expected prize is lower than the one when there is no possibility of a tie. Equilibrium also indicates that the equilibrium efforts do not depend on the prize allocated in case of a tie. Thus, if a contest designer wishes to obtain the largest effort from the contest, she should admit the possibility of a draw and assign zero prize for it. Moreover, if there is a constrained player in terms of resources an increase in the tie prize decreases the total expenditures spent by reducing the incentives for effort of the unconstrained player. The empirical application shows that my contest success function has promising results in determining the likelihood of various possible outcomes of the contest. Third chapter is also a Political Economy application of a contest and considers a two-player dynamic conflict in which, after an initial stage of arming decisions, players decide whether to stop or continuing fighting at each stage of conflict. The war does not stop until both sides decide to stop. Arms are destructive to rival forces and relative amount of forces determines the destructive power and bargaining power over the resource at each stage. In the subgame that starts after the initial arming decisions, war does not start at all if players discount future heavily or one side has a very large or a very small advantage in forces. Given that war starts, the smaller the relative advantage in forces the longer the conflict lasts. In the subgame perfect equilibrium of this game I find that the unique equilibrium is the one in which armed peace prevails.
