Kai A. Konrad

Orchestrating Rent Seeking Contests

Contests have different, sometimes quite complex, organisational structures. In particular, while most of the existing literature focusses on simultaneous contests, multistage contests are also quite frequently encountered. This paper seeks to provide a rationale for the latter by endogenising the choice of a contest structure, which is made by an organiser of a contest interested in maximising the efforts expended by the contenders.

Geography of the Family

We study the residential choice of siblings who are altruistic towards their parents. If some siblings moves further away, he or she can shift some of the burden of takin care for the parents to his or her siblings. Thus, siblings have a strategic incentive to move away that only children do not have. Siblings locate futher away from parents than only children, and, for some preferences, asymmetric location patterns emerge. These theoretical predictions are also confirmed by empirical data.

Family Policy with Non-cooperative Families*

The authors consider a noncooperative model of a familys time allocation between market work and providing a home-produced family public good (such as child care or care for the elderly). The model predicts underprovision of the public good. Because of crowding out, this does not necessarily warrant public provision. In contrast to other approaches in family economics, the authors find that attempts to redistribute between spouses may alter the final distribution within the marriage and that such a policy may be Pareto improving. They also find that some degree of progressivity of the income tax can be welfare improving. Copyright 1995 by The editors of the Scandinavian Journal of Economics.

Easy Targets and the Timing of Conflict

Contestants have to choose whether to initiate a contest or war, or whether to remain peaceful for another period. We find that agents wait and initiate the contest once their rival is sufficiently weak to be an easy target.

The Theory of International Tax Competition and Coordination

This chapter surveys the theory of international tax competition and coordination, which, matching the increasing policy importance of the topic, has grown substantially over the last thirty years. It focuses on the taxation of capital income, stressing that issues arise not only in relation to movements of productive capital – the primary concern in the earliest literature – but also in relation to the shifting of paper profits. It sets out, assesses, and uses as a unifying framework, the two workhorse models in the area. After discussing the welfare properties and comparative statics of non-cooperative equilibria under unconstrained tax competition, the chapter analyses key issues of coordination (within subsets of countries, for instance) and a range of specific topics (such as the nature and impact of tax havens).

Risk Aversion in Rent‐Seeking and Rent‐Augmenting Games

The effects of risk aversion are examined for two types of expenditures in rent-seeking contests: (1) rent-seeking expenditures, which improve the probability that the rent is obtained and (2) rent-augmenting expenditures, which increase the size of the rent to be awarded. Risk aversion is shown to reduce expenditures of type (2) unambiguously, while having an indeterminate effect on those of type (1). These two contrasting results are shown to derive from the very different effects rent-seeking and rent-augmenting expenditures have on the riskiness of a players position. Copyright 1997 by Royal Economic Society.

Strategic transfers and private provision of public goods

Abstract This paper considers strategic monetary transfers between two agents when these contribute to a mutual public good. If the agents differ in their contribution productivity, then the less productive agent has an incentive to make large unconditional transfers to the more productive agent. Although agents move simultaneously in each stage of the game, the less productive agent becomes a Stackelberg leader. Furthermore, the generic subgame perfect equilibrium is characterized by full specialization.

Credible threats in extortion

There is a fundamental credibility problem in the extortion business: will the gang retaliate if I refuse to pay? Unlike reputation models, we emphasize the up-front investment choice by the gang of which potential victims are uncertain. For small numbers of victims only a no-extortion equilibrium exists. However, as the number of potential victims becomes large, this equilibrium disappears. The only subgame-perfect equilibria have extortion and expected loss from violence. We justify and examine the properties of one particular set of equilibria. The model can also shed light on credibility problems in settings other than extortion.

Asymmetric conflict: weakest link against best shot

The authors study conflict on multiple fronts. A defending player needs to successfully defend all fronts, and an attacker needs to win at only one. Multiple fronts result in a considerable disadvantage for the defending player, and even if there is a defense advantage at each of them, the payoff of the defending player is zero if the number of fronts is large. With some positive probability, in the equilibrium defending players surrender without expending effort.

Foreign direct investment, intra-firm trade and ownership structure

Asymmetric information about true opportunity cost in trade between a multinational and its foreign affiliate can alleviate the hold-up problem in foreign direct investment. Selling shares in the affiliate to locals is also beneficial because it increase the parent multinationals information rent that is protected from a host governments confiscatory taxation.