Victorious alliances often fight about the spoils of war. This paper presents an experiment on the determinants of whether alliances break up and fight internally after having defeated a joint enemy. First, if peaceful sharing yields an asymmetric rent distribution, this increases the likelihood...

This paper considers evolutionarily stable decisions about whether to initiate violent conflict rather than accepting a peaceful sharing outcome. Focusing on small sets of players such as countries in a geographically confined area, we use Schaffer’s (1988) concept of evolutionary...

This paper considers a firm whose potential employees have private information on both their productivity and the extent of their fairness concerns. Fairness is modelled as inequity aversion, where fair-minded workers suffer if their colleagues get more income net of production costs. Screening...

In this paper, we consider a symmetric rent-seeking contest, where employees lobby for a governmental contract on behalf of firms. The only verifiable information is which firm is assigned the contract. We derive the optimal wage contracts of the employees and analyze, whether commitment by...

Chapter written for the Handbook of Reciprocity, Gift-Giving and Altruism

We show experimentally that fairness concerns may have a decisive impact on the actual and optimal choice of contracts in a moral hazard context. Bonus contracts that offer a voluntary and unenforceable bonus for satisfactory performance provide powerful incentives and are superior to explicit...

In the hold-up problem incomplete contracts cause the proceeds of relation-specific investments to be allocated by ex-post bargaining. The present paper investigates the efficiency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior...

We consider procurement of an innovation from heterogeneous sellers. Innovations are random but depend on unobservable effort and private information. We compare two procurement mechanisms where potential sellers first bid in an auction for admission to an innovation contest. After the contest,...

We consider a variant of the Tullock rent-seeking contest. Under symmetric information we determine equilibrium strategies and prove their uniqueness. Then, we assume contestants to be privately informed about their costs of effort. We prove existence of a pure-strategy equilibrium and provide a...

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that...