Ruhr Economic Papers

Ruhr Economic Papers #270

Does Delegation Help to Prevent Spiteful Behavior?

by Christian Rusche

TU Dortmund, 07/2011, 33 S./p., 8 Euro, ISBN 978-3-86788-315-3

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Abstract

The direct evolutionary approach according to Leininger (2003) states that players in a two player Tullock rent-seeking contest within a finite population behave „as if“ they were relative payoff maximizers. Accordingly contest expenditures are higher than in Nash equilibrium. The indirect evolutionary approach also predicts more aggressive behavior by the players since negatively interdependent preferences are evolutionary stable. Both players are willing to harm themselves in material terms just to harm their opponent even more. I consider that every player in the contest has to contract a delegate either using a relative contract or a no-win-nopay contract. I show that delegation once introduced is able to overcompensate all negative effects of negatively interdependent objective functions. But as in the case without delegation a commitment on more aggressive behavior is a dominant strategy. Nevertheless delegation endows principals with a material payoff that is equal to the payoff an individualistic player facing another individualistic player would get.

JEL-Classification: C72, D72, M52

Keywords: Contest; strategic delegation; spite; agency theory

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