We conduct an experiment to study whether there is reference dependence in voting behavior. In a standard election game with multiple rounds played, participants are randomly assigned to one of two treatment conditions that are intended to change the participants' (stochastic) reference point to correspond to either the act of voting or abstaining. To do so, we induce an endowment effect by randomly assigning each participant to a default choice of either voting or abstaining. In addition, we increase the salience of the assigned choice, which has been hypothesized to be another determinant of reference points. We do not find a statistically significant difference between treatment groups. These null results are in line with recent studies that argue that immediate endowment effects are not a robust finding. We further show that there are large and persistent bandwagon effects in our model elections, a finding that is difficult to reconcile with standard models of voter turnout.

We consider a Tullock rent-seeking contest with two firms and two investors. Each investor owns a majority share in one firm and a silent minority cross-shareholding in the other firm. We measure competition by either firms' aggregate efforts or rent dissipation. We show that aggregate efforts are smaller in our contest than in the benchmark case without cross-shareholdings. Next, we provide the necessary and sufficient conditions such that equilibrium rent dissipation in our contest is larger than in the benchmark case. Rent dissipation is larger under cross-shareholdings if and only if one firm is much more efficient than the other firm, and the cross-shareholding in the more efficient firm is sufficiently smaller than the cross-shareholding in the less efficient firm. (C) 2020 Elsevier B.V. All rights reserved.

We present experimental evidence on the effectiveness of corporate leniency programs. Different from other leniency experiments, ours allows subjects to have free-form communication. We do not find much of an effect of leniency programs. Leniency does not deter cartels. It only delays them. Free-form communication allows subjects to build trust and resolve conflicts. Reporting and defection rates are low, especially when compared to experiments with restricted communication. Indeed, communication is so effective that, with leniency in place, prices are not affected if cartels are fined and cease to exist.

We incorporate prospect-theory preferences in a game-theoretic model to study voter turnout. We show that voter turnout is heavily affected by agents having subjective reference points with respect to the vote or abstain decision and their subjective probability weighting in the decision-making process. Using empirically based parameter values, we show that our model has lower prediction error than other game-theoretic models with standard expected-utility preferences. We also find that our model maintains desirable comparative statics effects and leads to higher turnout predictions in larger electorates.

We consider a two-player Tullock rent-seeking contest with uncertain discriminatory power in the contest success function. We examine the cases where both players are either informed or uninformed about the size of the discriminatory power, as well as the case where only one player has private information about it. We show that in all three cases the contest has a unique (Bayesian) Nash equilibrium. In each case we characterize key properties of the equilibrium.

We offer a new explanation for the occurrence of delegation in rent‐seeking contests. We consider a two‐player contest for a prize of common value. The players only know that the prize is high or low, with given probabilities. Each player can hire a delegate to act on his behalf. After a delegate is hired, she privately observes the true value of the prize. We derive the conditions under which, respectively, no player, only one player, or both players delegate in equilibrium. ( JEL D7)

We consider a two-player rent-seeking Tullock contest where one player has private information about his valuation of the prize, which can be high or low. This player can send a costly signal to his opponent, i.e., he can commit to reduce the prize either by some absolute amount of money or proportionally, conditional on winning it. We show that both kinds of signaling imply completely opposite results for separating equilibria, both in terms of conditions for existence and the type of player who sends the costly signal.

We consider a rent-seeking contest where players compete in groups for a prize of given value. One group has private information about its number of members, which can be either small or large. The other groups have possibly different but publicly known sizes. We present an explicit characterization of the groups which are active in the unique equilibrium of the game, and relate the relative magnitude of group efforts to the size of the groups. We compare the decision of each type of the privately informed group to be active in equilibrium to the corresponding decision in a benchmark game with complete information.

We propose to assess the influence of a number of events on the degree of competition in the Dutch electricity wholesale market over the period 2006-2011 through a decomposition method based on the Residual Supply Index. We distinguish regulatory market-integration events, firm-level events and changes in the level of residual demand. We conclude that market-integration measures to improve competition have been effective, but that the changes in residual demand appear to have been equally important. Firm-level events have only had a minor impact on the intensity of competition.

In the 16th century, foreign ships passing through the Sound had to pay ad valorem taxes, known as the Sound Dues. To give skippers an incentive to declare the true value of their cargo, the Danish Crown reserved the right to purchase it at the declared value. We show that this rule does not induce truth-telling, but does allow the authorities to effectively implement a given tax rate.

We review the experimental literature on collusion, focusing in particular on the role of information. We confront the results with the theoretical literature and discuss the policy implications. The main insights from the experimental literature are the following. In the standard environment, firms have little success in achieving collusion. The only mildly collusive results are achieved when just two firms are active. Evidence on the effect of increasing the amount of available information on the likelihood of collusion is mixed. Voluntary information sharing has some collusive effect, even though collusion is not the main reason that firms choose to do so. The availability of the history of an industry's past prices seems to have some effect on the ability to collude.

We consider a model of vertical product differentiation where consumers care about the environmental damage their consumption causes. An environmental group is capable of increasing consumers’ environmental concern via a costly campaign. We show that the prospect of such a campaign can induce entry by a firm that is able to employ a cleaner technology than the one used by the incumbent. We further demonstrate that the subsequent competition can lead to an adverse effect on aggregate pollution, i.e. the decline in average industry pollution per product is offset by the increase in aggregate production.

We consider a two-stage model of a Tullock rent-seeking contest where one new potential entrant makes his appearance. In the first stage each other player can contribute to bribe this new player to commit not to enter the contest. In the second stage we have the actual contest either with or without the new player. We present the conditions such that there exist equilibria in which the new player is being bribed.

This paper considers a market with an incumbent monopolistic firm and a potential entrant. Production by both firms causes polluting emissions. The government selects a tax per unit of emission to maximize social welfare. The size of the tax rate affects whether or not the potential entrant enters the market. We identify the conditions that create a market structure where the preferences of the government and the incumbent firm coincide. Interestingly, there are cases where both the government and incumbent firm prefer a monopoly. Hence, the government might induce profitable monopolization by using a socially optimal tax policy instrument.

We examine a market in which a monopolistic firm supplies a good. The production of the good causes damage to the environment. Consumers are heterogeneous with respect to their disutility of the environmental damage. An environmental group can enter the market and set up a campaign in order to influence consumers’ preferences. We characterize the equilibrium of the resulting entry-deterrence game and investigate its properties. It turns out that the aggregated environmental damage is lowest if the firm is able to deter entry of the environmental group and, moreover, the fixed entry cost of the environmental group is small enough.

We investigate the impact of advertising in a static differentiated duopoly. First, we consider the Nash equilibrium if firms compete with both prices and advertising. Second, we examine the Nash equilibrium if firms only compete in prices and do not advertise. We characterize the circumstances in which the profit, output, and/or price of each firm is greater (or smaller) with advertising than without advertising.

We consider delegation in a rent-seeking contest with two players, where delegates have more instruments at their disposal than the main players. We endogenize both the decision to hire a delegate and the contingent fee offered to the delegates. We characterize the situations when either no, one or two players hire a delegate in equilibrium. We show that the decision to hire a delegate depends in a non-monotonic way on the size of the contested prize.

Summary We consider a market with a profit-maximizing monopolistic firm. Utility-maximizing consumers either buy one unit of the good or none at all. The demand for the good is influenced by local social interactions. That is, the utility which a consumer derives from the consumption of the good depends positively on the fraction of other consumers in his own social group that consume the good. We first consider a benchmark case where the population of consumers is not segmented and constitutes one social group. We derive the optimal price and profit of the firm for this case. Next, we analyse the optimal price and profit for the case where the population of consumers is partitioned into two different social groups. Comparing the results for the cases with one and two social groups, it turns out that the partition into groups does not unambiguously gives the firm the opportunity to raise its price and increase its profit. The effects depend on a non-trivial interplay between the strength of the social interaction effect and the specific composition of the social groups.