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Social Choice and Welfare

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01.04.2015

Extremism drives out moderation

verfasst von: Bettina Klose, Dan Kovenock

Erschienen in: Social Choice and Welfare | Ausgabe 4/2015

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Abstract

This article examines the impact of the distribution of preferences on equilibrium behavior in conflicts modeled as all-pay auctions with identity-dependent externalities. Centrists and radicals are defined using a willingness-to-pay criterion that admits preferences more general than a simple ordering on the line. Extremism, characterized by a higher per capita expenditure by radicals than centrists, may persist and generate higher aggregate expenditure by radicals, even when they are relatively small in number. Our results demonstrate the importance of the institutions of conflict in determining the role of extremism and moderation in economic, political, and social environments.

Vorheriger Artikel Inefficiency in the shadow of unobservable reservation payoffs

Nächster Artikel On stable outcomes of approval, plurality, and negative plurality games

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Linster (1993) argues that such a solution exists unless the contest is degenerate in the sense that players are indifferent to the outcome.

Konrad (2006) examines the effect of silent shareholdings in an all-pay auction framework with complete information and finds that the social value may increase or decrease depending on the identity of the firm that holds a share in its competitor. However, Konrad does not further analyze settings in which three firms are active in equilibrium and allows only one player’s valuation to be endogenous.

For instance, in first-price winner-pay auctions, Funk (1996) and Jehiel and Moldovanu (1996) show that multiple payoff nonequivalent equilibria may arise. Jehiel and Moldovanu (1996) show that if players can commit in a pre-auction stage not to participate, both potential winners and losers may choose non-participation, despite the inability to avoid the negative externality. Janssen and Moldovanu (2004) show that revenue and efficiency may be unrelated to each other.

Esteban and Ray (1999) do not show formally that the distance measure induced by preferences over outcomes is a metric. See Sect. 2 for our assumptions under which there exists a semi-metric induced by players’ willingness to outbid each other.

In this case we can employ our analysis to a transformed bid , \(\beta =C(b)\). We elaborate on other potential assumptions on cost in Sect. 3.

This definition is based on Siegel (2009) but accounts for the identity-dependent externalities.

To our knowledge no formal definition of a radical in a general n-player environment exists in the literature. Intuitively, Definition 1 captures the notion that if a radical player is removed from the contest, the maximal reach across all remaining pairs of players should strictly decrease. That is, the maximal willingness to pay to win decreases.

Generally the concept of social welfare additionally takes expenditure into account. We follow Jehiel and Moldovanu (2006) and Linster (1993) by using the sum of valuations to measure social welfare in a context of contests with identity-dependent exernalities. This interpretation implies that the players’ expenditures are considered transfers. In some conflicts which are covered by our model, e.g. political lobbying, expenditures are often more accurately viewed as a social waste of resources. Therefore, we additionally discuss the effects of the auction CSF on expected total expenditure. We further elaborate on this issue in the conclusion.

Even if the valuation vectors were slightly perturbed in a way such that players 1 and 3 were no longer symmetric the main conclusions of Propositions 3 and 4 continue to hold in the sense that the player who was previously the radical will always continue to actively participate in the conflict and for each player who was previously a centrist there exists an equilibrium in which he stays out of the conflict. This is true even though one of the players previously a centrist is a radical in the perturbed game (see Klose and Kovenock 2014).

The assumption that groups are exogenously determined is common in the literature on contests between groups. The strategic formation of groups in contests is addressed in e.g. Baik and Lee (2001), Skaperdas (1998).

In this type of contest a group’s probability of winning depends on their total effort and all members of the winning group receive their valuation of winning (e.g. Baik (1993), Baik et al. (2001), Esteban and Ray (1999)). Alternatively groups may compete for a private-good prize, whereupon the prize is allocated within the winning group through a second stage contest (e.g. Katz and Tokatlidu (1996), Konrad and Kovenock (2009)) or a previously determined sharing rule (Baik and Lee 2001).

See, however, Klose and Kovenock (2014) for an analysis of all-pay auctions with identity-dependent externalities and more general preference structures.

We let \(p\{\hbox {i wins }|\, b_j\}\) denote the probability that player \(i\) wins conditional on the event that player \(j\) bids \(b_j\).

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Titel: Extremism drives out moderation
verfasst von: Bettina Klose
Dan Kovenock
Publikationsdatum: 01.04.2015
Verlag: Springer Berlin Heidelberg
Erschienen in: Social Choice and Welfare / Ausgabe 4/2015
Print ISSN: 0176-1714
Elektronische ISSN: 1432-217X
DOI: https://doi.org/10.1007/s00355-014-0864-1

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