The formation of an alliance in conflict situations is known to suffer from a collective action problem and from the potential of internal conflict. We show that budget constraints of an intermediate size can overcome this strong disadvantage and explain the formation of alliances. © 2009...

Considering several main types of dynamic contests (the race, the tug-of-war, elimination contests and iterated incumbency fights) we identify a common pattern: the discouragement effect. This effect explains why the sum of rent-seeking efforts often falls considerably short of the prize that is...

We consider the properties of perfectly discriminating contests in which players' abilities are stochastic, but become common knowledge before efforts are expended. Players whose expected ability is lower than that of their rivals may still earn a positive expected payoff from participating in...

Victorious alliances often fight about the spoils of war. This article 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...

We study the merger paradox, a relative of Harsanyi's bargaining paradox, in an experiment. We examine bilateral mergers in experimental Cournot markets with initially three or four firms. Standard Cournot-Nash equilibrium predicts total outputs well. However, merged firms produce significantly...

We analyze the incidence and welfare effects of unit sales tax increases in experimental monopoly and Bertrand markets. We find, in line with economic theory, that firms with no market power are able to shift a high share of the tax burden to consumers, independent of whether buyers are...

In a Stackelberg framework of capital income taxation it is shown that imposing a minimum tax rate that is lower than all countries' equilibrium tax rates in the unconstrained non-cooperative equilibrium may reduce equilibrium tax rates in all countries. © 2008 Elsevier B.V. All rights reserved.

A lack of sufficient diversification in research strategies has been identified as an important problem for delegated research. We show that this problem can be solved by local competition (such as bribery, lobbying, rent seeking, competition at the patent office) among players who apply the...