It is shown that rent-seeking contests with continuous and independent type distributions possess a unique pure-strategy Nash equilibrium.

Trendsetters wish to be perceived as the type that defines normative behavior. Incorporating norm formation in Bernheim (1994)’s model yields equilibria with social considerations concentrating behavior, allowing multiple conformist pools. Refinements link each pooling equilibrium to a unique...

Some problems are more easily solved if context is provided. A stylized result from beauty contest experiments is that most choices are consistent with level-1 or level-2 thinking rather than the Nash equilibrium. The beauty contest experiment reported in this paper includes treatments in which...

We consider a differential game with a corrupt government and civil society as its players. We characterize open-loop and feedback Nash equilibria and find that, whereas it is in the best interest of the government not to commit to a repression policy, civil society is better off precommitting...

We propose an evolutionary game to analyse the dynamics of tolerance among heterogeneous economic agents. We show that: (i) intolerance is much more persistent than tolerance; (ii) a fully tolerant society assures prosperity; (iii) cultural integration should precede economic integration.

This paper provides a link between the structural approach of econometrics of auctions with the stochastic frontier literature in an effort to model excess bidding behaviour. The new technique is applied to timber auction data. The results suggest that both systematic overbidding and...

The incentive effect of a handicap in a tournament competition is studied. A handicap may decrease the effort levels of the advantaged group or the disadvantaged group. However, the average effort level will always increase as long as the performance measure is informative of effort in a...

We consider how parties’ formal contracts are underpinned by their ongoing relationship and how welfare changes as the legal system improves. Regardless of impatience, the parties write formal contracts that they would not honor–despite stipulated penalties–if they interacted only once....

We experimentally study clock auctions to dissolve partnerships jointly owned by two players. Subjects are found to deviate systematically from the Nash equilibrium. We explain the bidding behaviour in terms of risk aversion and/or non-standard utility theory.

We analyse bonus payments for officials, who transfer payments truthfully to the government rather than collecting bribes. We show that optimised bonus payments are always beneficial to the government, making them a more effective anti-corruption measure than simple wage increases.