Karl Wärneryd

We consider contestants who must choose exactly one contest, out of several, to participate in. We show that when the contest technology is of a certain type, or when the number of contestants is large, a self-allocation equilibrium, i.e., one where no contestant would wish to change his choice of contest, results in the allocation of players to contests that maximizes aggregate equilibrium effort. For a class of oligopoly models that are equivalent to contests, this implies output maximization.

During the past two centuries, western nations have successively extended the voting franchise to citizens of lower income. We explain this process of democratization as a rational way for incumbent elites to wage war effectively on other nations, as in a strategic game of international conflict handing over military spending decisions to citizens who face a lower tax cost of arming may confer a strategic delegation advantage. We find supporting empirical evidence in case studies of franchise extensions in the United Kingdom, France, and the United States.

We consider rules (strategies, commitments, contracts, or computer programs) that make behavior contingent on an opponent’s rule. The set of perfectly observable rules is not well defined. Previous contributions avoid this problem by restricting the rules deemed admissible. We instead limit the information available about rules. Each player can only observe which class, out of a collection of classes smaller than the number of rules, the opponent’s rule belongs to. For any underlying 2-player, finite, normal-form game there is a game extended with coarsely observable strategies that has equilibria with payoffs arbitrarily close to any feasible, individually rational payoff profile.

Nash proposed an interpretation of mixed strategies as the average pure-strategy play of a population of players randomly matched to play a normal-form game. If populations are finite, some equilibria of the underlying game have no such corresponding “mass-action” equilibrium. We show that for mixed strategy equilibria of 2 × 2 games, the requirement of such a correspondence is equivalent to neutral evolutionary stability.

We consider social contracts for resolving conflicts between two agents who are uncertain about each other’s fighting potential. Applications include international conflict, litigation, and elections. Even though only a peaceful agreement avoids a loss of resources, if this loss is small enough, then any contract must assign a positive probability of conflict. We show how the likelihood of conflict outbreak depends on the distribution of power between the agents and their information about each other.

We study the long-run behavior of an economy where agents who are heterogeneous with respect to risk attitudes can either earn a certain income or enter a risky rent seeking contest. In contrast with standard evolutionary game theory, we distinguish between utility and material payoffs, and allow the population distribution of preferences to evolve over time in response to material payoffs. We show that, in particular, initial distributions with full support converge to stationary states where all types may still be present, risk lovers specialize in rent seeking, and the available rents are perfectly dissipated.

We suggest an operational definition of transaction cost as the expected value of strategy information in games played by individuals randomly matched from a large population. We relate the concept of a transaction cost minimum to those of Nash equilibrium, efficiency, and evolutionary stability, and apply it in a simple model of the Coasean firm. In particular, we identify circumstances in which evolutionary dynamics will minimize transaction cost, which allows various informal hypotheses about the relation between institutional evolution and transaction cost to be addressed in a precise sense.