This paper presents a formal theory of reciprocity. Reciprocity means that people reward kind actions and punish unkind ones. The theory takes into account that people evaluate the kindness of an action not only by its consequences but also by the intention underlying this action. The theory...

We investigate the effect of competition on quality in regulated markets (e.g., health care, higher education, public utilities), using a Hotelling framework, in the presence of sluggish demand. We take a differential-game approach, and derive the open-loop solution (providers choose the optimal...

This paper investigates how group membership and competition among trustors interact with trust and trustworthiness in a laboratory one-shot trust game. To analyze these effects, we apply a 2x2 design. We induce group membership by letting subjects play coordination games with clear focal...

Wars of conquest and wars of independence are characterized by an asymmetric payoff structure: one party gets aggregate production if it wins, and its own production if it loses, while the other party gets only its own production if it wins, and nothing if it loses. We study a model of war with...

We analyze equilibria of two-player contests where players have intention-based preferences. We find that players invest more effort compared to the case with selfish preferences and are even willing to exert effort when the monetary value of the prize converges to zero. As a consequence,...

I present a two-player nested contest which is a convex combination of two widely studied contests: the Tullock (lottery) contest and the all-pay auction. A Nash equilibrium exists for all parameters of the nested contest. If and only if the contest is sufficiently asymmetric, then there is an...

This paper investigates how heterogeneity in contestants ́investment costs affects the competition intensity in a dynamic elimination contest. Theory predicts that the absolute level of investment costs has no effect on the competition intensity in homogeneous interactions. Relative cost...

We consider a two period model in which an incumbent political party chooses the level of a current policy variable unilaterally, but faces competition from a political opponent in the future. Both parties care about voters payoffs, but they have different beliefs about how policy choices will...

We provide new experimental evidence which suggests an asymmetric discouragement effect in lottery contests with heterogeneous abilities. Compared to a symmetric contest, subjects invest less effort when facing a stronger opponent, but they invest the same when facing a weaker opponent. Our...

A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the "discouragement effect." Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the...