Christian Riis

A multi-winner nested rent-seeking contest*

This paper considers a symmetric imperfectly discriminating rent-seeking contest in which there may be several winners. We first demonstrate a serious flaw in previous work and then go on to suggest an alternative method for analyzing the contest. In contrast to the previous work, we show that the value of the rent is fully dissipated in equilibrium as the number of players becomes large.

Allocation efficiency in a competitive bribery game

We consider the selection properties of a competitive bribery model in the presence of two types of asymmetry: unevenness between the competitors and unfairness in the contest rules. Only under very special conditions does the benchmark model yield allocation efficiency; in other cases, the effect on allocation efficiency of making the contest more unfair is ambiguous and parameter specific. We present conditions under which each result obtains. Our results indicate that it is socially optimal to run an unfair contest in order to redress the allocation inefficiency introduced when contestants are asymmetric. We show, however, that a selfish, income-maximizing bribee will discriminate in the opposite direction to that which society would prefer.

Influence and the discretionary allocation of several prizes

Abstract When a decision process involves discretion, it may also be open to influence by various actors. If a single prize is at issue, then this influence can be modelled in the context of a rent-seeking game. However, the basic rent-seeking model needs to be extended in order to examine the amount of influence exerted when more than one prize is at stake. In this paper, we investigate the effect of several factors which may affect rent-seeking in this multi-prize framework but are not accounted for in single-prize models; examples here are the number of prizes, the division of the prize mass and the distribution mechanism which is employed.

Rank-order tournaments and selection

Rank-order tournaments are often presented as devices for aligning incentives in a principal-agent setting. In most of this literature agents are expected to be identical so that the principal is indifferent ex ante as to who wins the contest, implying that the selection properties of the tournament can be ignored. In this paper we consider a tournament which is not necessarily symmetric, and in which agent type is private information. The principal cares about who wins, but the basic tournament will not achieve perfect selection; the lower-type agent may sometimes win. In a two-player tournament we present a simple reward system in which the winners reward depends upon which (if any) of two “test standards” is passed; conditions are presented under which this system allows the principal to choose the best agent. This system can be extended in a simple manner to rank types in ann-player tournament. We suggest that the theory can be applied to internal labor markets and research contests.

A Counterfactual Study of Economic Impacts of Norwegian Emigration and Capital Imports

The economic history of Norway has been characterised by periods of large factor flows to and from other countries. In the latter part of the nineteenth century and the early parts of this century, a large share of the Norwegian population (and labour force) migrated overseas. In Europe, only Ireland had higher emigration rates. From the 1890s up to the First World War, capital imports covered a fairly large part of gross domestic investment, and in the 1920s and the 1970s, capital imports were again substantial. Compared with most other developed countries (cf. Kuznets, 1966, tables 5.3 and 5.5) Norway has financed a larger part of its gross domestic capital formation by capital imports. In fact, Canada and Australia had even higher shares of foreign financing but, as Marris (1985) notes, these countries share with Norway the characteristics of sparse population and large unexploited natural resources.

Entry into a new market: A game of timing

Abstract We study entry into a new market in a model where firms choose when to enter the market. An early entry is profitable because it yields a strategic advantage in the market; however, costs will also be larger owing to interest on the capital cost. It is shown that rent equalization need not occur, and that social welfare may be lower under competition than under pure monopoly. Furthermore, under some circumstances there is a strictly positive probability that the firms enter simultaneously, even in the limit when the period length converges to zero.

Bayes-Nash Equilibria in Generalized Second Price Auctions with Allocative Externalities

In this paper, we investigate an incomplete information model of generalized second price auctions with allocative externalities originating from the heterogeneous match rates of bidders. A novel feature of our model is that it generates endogenous click-through rates (CTRs). In this setting, we establish existence of symmetric efficient equilibria for common classes of primitives. This contrasts with the findings of Gomes and Sweeney (2014), who study a similar model but with fixed CTRs. Moreover, non-existence results require strong assumptions on the primitives of the model. We conclude that existence of equilibria in GSP with incomplete information is quite general.

An equilibrium characterization of an all-pay auction with certain and uncertain prizes

Abstract In the important contribution “All pay auctions with certain and uncertain prizes” published in Minchuk and Sela (2014) , the authors analyze an all pay auction with multiple prizes. The specific feature of the model is that all valuations are common except for the valuation of one of the prizes, for which contestants have private valuations. However, the equilibrium characterization derived in the paper is incorrect. This paper provides the correct equilibrium characterization of the model.

Petroleum Taxation and Investment Behaviour

Petroleum administration can be regarded as a principal-agent problem. The government allocates exploration and production rights to petroleum companies on behalf of the population. The government is the principal and the companies are agents. With the aim of capturing revenue for the state, the government devises a petroleum tax system which takes account of the investment decisions made by the companies, while acknowledging for the fact that the companies may report strategically to the government. An important issue is how tax deductions are to be treated in investment analysis. A discrepancy arises here between assumptions made in some areas of tax theory and the actual investment analyses conducted by the companies. Tax theory has given rise to discussion and controversial tax proposals for the petroleum sector in Norway, Denmark and Australia. It led, for example, to reductions in tax-related depreciation for the Norwegian petroleum industry in May 2013. The article reviews this tax debate and analyses the implications of basing tax design on counter-factual investment behaviour.