The Max‐Min Group Contest: Weakest‐link (Group) All‐Pay Auction

We investigate a group all‐pay auction in which each group's effort is represented by the minimum among the effort levels exerted by the group members and the prize is a group‐specific public good. We fully characterize the symmetric equilibria for two groups. There are four types of equilibria: the pure strategy equilibria in which all (active) players exert the same effort; the semi‐pure strategy equilibria in which the players in a group play the same pure strategy whereas those in the other group play the same mixed strategy; the nondegenerate mixed strategy equilibria with continuous support; and the nondegenerate mixed strategy equilibria with discontinuous support. We then analyze a general contest with n groups.     

Men,women, and the ballot: Gender imbalances and suffrage extensions in the United States

Women's suffrage led to one of the greatest enfranchisements in history. Voting rights, however, were not won by force or threats thereof, a fact leading political economy theories find hard to explain. Studying the timing of suffrage extensions in US states between 1869 and 1919, we find that a scarcity of women strongly promoted early transitions to women's suffrage. Such scarcity significantly reduced the political costs and risks for male grantors of the suffrage. It might also have made women's suffrage attractive as a means to attract more women.     

Party Politics,Governors, and Economic Policy

In this article, we evaluate the role of elections in governors' state tax policy making. Does it matter for state taxes whether the governor is a Democrat or Republican and whether she is eligible for re‐election or faces a binding term limit? Using a Regression Discontinuity Design and a panel of U.S. states, we find that the manner in which governors of different parties implement different tax policies turns crucially on the incumbent's eligibility for re‐election. Re‐electable Democratic governors increase income taxes relative to similarly situated Republicans, yielding divergence between party policy positions. However, governors facing a binding term limit exhibit the reverse policy difference, resulting in a movement of policy back together.     

Regulating the Anticommons: Insights from Public‐Expenditure Theory

This article offers a new interpretation of the traditional Cournot complements problem, or anticommons, by using the theory of public goods to gain a perspective on the problem. Specifically, I examine the pricing strategies and regulation of multiple monopolies that produce products which consumers view as perfect complements. I show that collusion by the firms increases total social welfare and that the collusion problem can be reinterpreted as a problem of provision of public goods from the point of view of the firms. I take this insight further and derive the familiar concepts of the Samuelson marginal condition and the ratio equilibrium for the firms. I compare these outcomes to the first best solution and then apply incentive‐compatible mechanisms to strategically implement the Pareto superior ratio‐equilibrium outcome and the optimal marginal‐cost pricing outcome. Finally, I show how this methodology can be applied to the more familiar Cournot model of oligopoly.     

Determinants of the Demise of Terrorist Organizations

This article investigates the determinants of terrorist groups' failure by applying survival analysis in a discrete‐time specification. Our sample consists of a diverse set of 586 terrorist groups, in which just over 63% end operations (demise) during 1970–2007. We use RAND event data and Jones and Libicki terrorist group data. Findings show that the survival of terrorist groups is bolstered by diversifying attacks, having multiple home bases, locating in the Middle East, locating in a democratic country, and limiting reliance on transnational terrorist attacks. Moreover, larger groups have better survival prospects. Religious fundamentalist terrorist groups face better survival prospects than other terrorist groups. Terrorist groups located in a country with larger tropical territory are less likely to end operations; however, groups based in a landlocked country are more likely to fail.     

The CEO Arms Race

This article constructs a game‐theoretic model in which high chief executive officer (CEO) pay emerges as the outcome of an arms race, with each firm hiring a highly paid CEO to protect its competitive position against rivals who also hire highly paid CEOs. For an arms race to emerge, highly paid CEOs must generate idiosyncratic, privately known internal effects on profit, and CEO pay disparities must also generate asymmetric profit differences from external effects beyond the simple differences in pay. If the distribution of internal effects satisfies a key uniformity condition, an arms race emerges as the only equilibrium of the game.     

Optimal wages for politicians

I consider a society that has to decide on the wage that it offers for an elected official. Potential candidates differ in their abilities, which determines their effectiveness in office and their opportunity cost. They consider the wage when deciding whether to enter as candidates, and if they do, how hard to campaign. The remuneration for the official that maximizes ordinary citizens’ expected utility is a function of the proportion of competent voters who are better informed about the quality of the candidates and are not influenced by the campaign. I use the data on U.S. governor salaries over six decades to evaluate some implications of the model. Specifically, the proportion of the state's population with a bachelor's degree—a proxy for the proportion of competent voters—is negatively correlated with the governors’ salaries when controlled for other factors.     

Contribution Limits and Transparency in a Campaign Finance Experiment

We experimentally compare electoral outcomes when donor contribution limits are varied. The effect of contribution limits is studied under three levels of transparency: one where donors' preferences and donations are unobserved by the candidate and public; one where they are observed by the candidate but not the public; and one where they are observed by all. We find that a combination of stricter contribution limits and full transparency is most successful at limiting donors' influence on policy choice. We also find that stricter contribution limits improve social welfare in some treatments. We further find that the partial and no anonymity settings lead to “centrist bias,” whereby implemented policies, on average, are more centrist than the candidate's preferences in most treatments.     

Face Value: Information and Signaling in an Illegal Market

Economists argue that rich information environments and formal enforcement of contracts are necessary to prevent market failures when information asymmetries exist. We test for the necessity of formal enforcement to overcome the problems of asymmetric information by estimating the value of information in an illegal market with a particularly rich information structure: the online market for male sex work. We assemble a rich data set from the largest and most comprehensive online male sex worker Web site to estimate the effect of information on pricing. We show how clients of male sex workers informally police the market in a way that makes signaling credible. Using institutional knowledge, we identify the specific signal male sex workers use to communicate quality to clients: face pictures. We find that there is a substantial return to the signal in this market. The findings provide novel evidence on the ability of rich information environments to overcome problems of asymmetric information without formal enforcement mechanisms.     

Public Spending and the Paradox of Supermajority Rule

This article examines the paradox that a supermajority rule in a legislature promotes excessive government spending. We propose a simple conjecture: If rent‐seeking coalitions dominate legislative politics and if individual legislators' demands for rent‐seeking activities are price‐inelastic, a change of legislative rules from simple majority to a supermajority will lead to greater public spending, other things equal. Using data from U.S. state legislatures, 1970 to 2007, we find that the adoption of a supermajority rule has a robust, positive impact on various types of tax revenues and government expenditures.     

Estimating the wage costs of inter- and intra- sectoral adjustment

Estimating the Wage Costs of Inter- and Intra-Sectoral Adjustment. — The proposition that labour market adjustments to intra-industry trade are less costly than adjustments to inter-industry trade is a widely-held belief amongst trade economists. If there are significant sector-specific skills, then this ‘smooth adjustment hypothesis’ seems intuitive. Direct evidence relating to this issue remains largely anecdotal. In this paper we estimate the returns to tenure within jobs, industries and occupations in order to predict the costs, in terms of wage losses, of moving jobs between and within sectors. We find no compelling evidence that wage costs of moving between industries are larger than the costs of moving within industries.     

Determinants of Geographic Differentials in the Voter Participation Rate

Voter participation rates vary widely across the 50 states. This empirical study seeks, within the context of a broadened version of the ‘rational voter model,’ to identify determinants of this interstate variation. Using the 2004 general election as the study period, it is found that the voter participation rate in a state is positively related to the percent of the state's adult population with at least a high school education, the state's unemployment rate, the percent of the state's population age 65 and older, and the female labor force participation rate in the state. In addition, it is found that voter turnout in a state is negatively related to the state's median family income and the percentage of its population that is Hispanic.     

Compensation for Regulatory Takings with a Redistributive Government

Richard Epstein has argued that governments should pay compensation for regulatory actions that impose costs on a subset of society. I develop a model in which there are two groups, one of whom benefits from a regulation, and one of whom bears the costs. A potentially biased government sets the level of the regulation and also redistributes income across the two social groups via the tax system. When taxes are nondistortionary, the government chooses the efficient level of the regulation to maximize wealth and then uses the tax system to distribute this wealth according to its preferences. If the government is forced to pay compensation for the costs of the regulation, it simply undoes this via the tax and transfer system. When taxes are distortionary, societal wealth is monotonically decreasing in the degree of compensation to be paid, so that the optimal level of compensation is zero.     

Strong Presidential Approval or Disapproval Influencing the Expected Benefits of Voting and the Voter Participation Rate

This empirical study seeks to broaden the interpretation of the rational voter model so as to identify and better understand key determinants of the expected benefits from voting and hence key determinants of the aggregate voter participation rate in the US. Using annual data for all years in the 1960–1997 study period, this study finds that the voter participation rate has been positively impacted by strong public approval or strong public disapproval of the incumbent President, a finding unique to this literature and study period. In addition, the aggregate voter participation rate has been positively impacted by such factors as the Gulf War, which is generally regarded as having been popular among the US electorate, and a rising unemployment rate. This study also finds the voter participation rate to have been negatively impacted by the publics dissatisfaction with government, as well as by the Watergate scandal.The author is indebted to Cassandra Copeland for helpful information, comments, and guidance.     

Wage differentials between skilled and unskilled workers

Wage Differentials Between Skilied and Unskilled Workers. — This paper analyzes the change in the ratio of wages paid to skilled and unskilled workers and the effect of these changes on employment by means of a simultaneous-equation pooled time-series cross-section analysis. Hypotheses are derived on the basis of specific theories. The data cover 23 industries over the period 1965–90. The explanatory variables are the cyclical deviations from long-run growth as well as several collective bargaining variables. The wage differential has a strong effect on employment of the two groups under investigation. However, demand has no significant impact on the wage relation.     

Does Manufacturer Advertising Crowd‐in or Crowd‐out Retailer Advertising? An Application of an Endogenous Prize Contest with Asymmetric Players

When a manufacturer advertises, what is the impact on retailer advertising? I analyze a contest model of advertising where total advertising by the manufacturer and by retailers determines market size, and the relative level of advertising by each retailer determines market share. If retailers are symmetric I show that there is a crowding‐in effect so increased manufacturer advertising increases retail advertising. But if one retailer is stronger, then marginal increases in manufacturer advertising have a crowding‐out effect on retailer advertising, while sufficiently large increases have a crowding‐in effect by “jump‐starting” competition between retailers for the larger market. Furthermore, asymmetric abilities in such contests can lead the weaker player to effectively drop out of the contest, thereby undermining the ability of increased prizes to increase effort by intensifying competition.     

Public investment and reelection prospects in developed countries

A growing body of literature suggests that office‐motivated politicians manipulate fiscal policy instruments to enhance their reelection prospects. This article directly examines the impact of fiscal policy on incumbents’ reelection prospects by focusing on the impact of public investment. This impact is estimated using a panel of 20 countries belonging in Organisation for Economic Co‐operation and Development over the period 1972–1999. We find that the level of public investment in the earlier years of an incumbent's term in office improves their reelection prospects, whereas election year manipulation of public investment is neither rewarded nor punished. Our evidence also suggests that, after controlling for the level of deficit and public investment, the level of government revenue both in the election and nonelection years does not seem to affect reelection prospects. Moreover, we find that deficit creation during elections and in nonelection years are not rewarded by voters.     

Multi‐battle Contests: An Experimental Study

We examine behavior of subjects in simultaneous and sequential multi‐battle contests, where each individual battle is modeled as an all‐pay auction with complete information. In simultaneous best‐of‐three contests, subjects are predicted to make positive bids in all three battles, but we find that subjects often make positive bids in only two battles. In sequential contests, theory predicts sizable bids in the first battle and no bids in the subsequent battles. Contrary to this prediction, subjects significantly underbid in the first battle and overbid in subsequent battles. Consequently, instead of always ending in the second battle, contests often proceed to the third battle. Finally, although the aggregate bid in simultaneous contests is similar to that in sequential contests, in both settings, subjects make higher aggregate bids than predicted. The observed behavior of subjects can be rationalized by a combination of multidimensional iterative reasoning and a nonmonetary utility of winning.