Luis C.
Corchón

Contest rules are not neutral. They determine how effort is translated into success, whether equilibrium exists and is unique, how much effort contestants expend and whether the resulting allocation is socially desirable. My work provides behavioural and institutional foundations for widely used contest success functions and characterizes robust designs, including contests with dominant strategies.

When current competition changes future strength, contestants behave very differently from participants in a one-shot contest. Early victories can reinforce later advantages, while financially disadvantaged contestants may borrow and jeopardize their survival in order to remain competitive—the despair effect. Entry is also more delicate when contestants must choose among different arenas: equilibrium is guaranteed in some environments but may fail when participation is discrete and the arenas are interconnected.

Peace can often be sustained even when agreements are not enforceable. Transfers between rivals may prevent a costly war, although their direction and effectiveness depend on the distribution of resources, relative military strength and the cost of conflict. Initial ownership can enlarge the set of peaceful outcomes, whereas even a small amount of asymmetric information may destroy peace and trigger war.

Competition may induce participants to weaken their rivals instead of improving their own performance. In cooperative production, merit-based rewards can generate more sabotage than egalitarian arrangements, and the absence of sabotage depends on the interaction between technology, relative productivity and the design of the sharing rule.

I study how firms shape market structure through entry, exit and internal organization. Allowing firms to create independent divisions can lead either to perfect competition or, when fixed costs matter, to a natural oligopoly. With free entry, familiar comparative-statics results may fail: an increase in demand can even reduce industry output, and observed profits or concentration can be misleading indicators of market power. Financial constraints add further instability by making the eventual exit of a firm unavoidable in some environments. Finally, repeated interaction can sustain an unusual form of collusion in which firms take turns holding monopoly power rather than coordinating their actions simultaneously.

I show that the welfare effects of market power cannot generally be inferred from concentration or price-cost margins alone. With asymmetric firms or fixed costs, welfare losses may remain very large even when several firms compete. Under product differentiation, standard market data may be insufficient unless additional information about demand elasticities is available. My work develops formulas and models that make these losses measurable while explaining why conventional assumptions may systematically understate them.

I study competition through dimensions other than prices and quantities. Inefficient location choices and incomplete market coverage can generate substantial welfare losses, sometimes larger than those produced by non-optimal quality. Technology transfer also depends critically on product differentiation and firm asymmetries: firms of different sizes may transfer technology fully, while technologically similar firms may have no incentive to do so.

I examine how regulation should respond to both market power and the regulator's limited information. Optimal merger policy is implementable only when private and social incentives are sufficiently aligned, as may occur when mergers generate verifiable cost savings. Price regulation depends on the interaction between demand, costs and uncertainty, while trade policy can produce counterintuitive welfare effects. Imperfect competition does not automatically transmit cost increases more strongly than perfect competition: precise conditions are required for this to occur.

I study implementation when some of the assumptions behind standard mechanisms fail: the designer may be a strategic player, possess limited information or be unwilling to carry out the punishments prescribed outside equilibrium. I show when implementation remains possible under these constraints. Robust mechanisms may require remarkably little information, but credibility and renegotiation impose important limits. Paradoxically, giving the designer more information may sometimes reduce what can be credibly implemented.

I construct decentralized games that reproduce allocations normally associated with competitive or socially desirable outcomes. Simple market mechanisms can implement ratio equilibria for public goods and make Nash, strong and active Walrasian equilibria coincide, including in economies with indivisible goods. Mechanisms can also implement Pigouvian allocations in the presence of externalities. However, implementation becomes much more difficult when relevant states cannot be contracted upon or when trade takes place before prices reach equilibrium.

I investigate whether efficient mechanisms can induce agents to reveal their private information truthfully. For public and private goods, efficiency and individual rationality are generically incompatible with strategy-proofness, even when preferences are restricted to relatively small domains. These impossibility results identify when designers must abandon dominant-strategy truth telling and rely instead on equilibrium implementation.

I apply implementation theory to scholarship assignment and the distribution of output from a commonly owned technology. Appropriately designed mechanisms can overcome conflicting individual interests and implement efficient allocations. Experimental evidence also shows that a canonical Nash mechanism selects the intended outcome in a large majority of cases, while simple fines can substantially improve its performance. Informal social restrictions—what a community considers a ‘decent’ proposal—may also shape the outcomes that can be implemented.

I study institutions in which individuals choose between productive activity, rent seeking and tax evasion. Institutional reform does not necessarily improve economic performance: parliamentary rule may generate more rent seeking than autocracy, even when no individual has an intrinsic preference for it. Tax compliance also depends on strategic interaction between the government and taxpayers, particularly when individuals can choose whether to enter the underground economy.

I study how voting affects the composition and political control of organizations over time. An organization that formally rewards excellence may nevertheless experience cycles in the quality of its members and eventually become dominated by mediocre agents. In democratic organizations, forward-looking individuals may voluntarily relinquish power to another group. Highly productive members can also be exploited or excluded when their participation threatens the coalition currently in control—a phenomenon I call political unemployment.

I examine how collectively owned organizations choose reward systems and work incentives. Efficient and individually rational sharing rules need not be selected by majority voting, while fully efficient cooperation requires very particular institutional conditions. Meritocracy can increase effort and output, but excessive meritocracy may encourage socially excessive work or sabotage. In a dynamic economy, meritocracy promotes human-capital accumulation, yet only a particular degree of meritocracy achieves intergenerational efficiency.

Rather than assuming that there is a single universally accepted criterion of justice, I study societies in which individuals hold different views about fair outcomes. I represent these views through aspiration functions and develop procedures for aggregating them into a socially acceptable judgement. Many familiar concepts of distributive justice emerge as particular cases of this general approach.

I study games in which each player’s payoff depends on their own action and on an aggregate of the actions chosen by all participants. This structure makes it possible to analyse large and heterogeneous games without tracking every bilateral interaction. Aggregative games provide a common framework for models of oligopoly, public-good provision, contests, political competition and problems in engineering and other social sciences.

I develop comparative-statics tools for studying how equilibrium actions and payoffs respond to changes in the number of players or in the parameters of their payoff functions. Under strong concavity and strategic substitutability, general aggregative games inherit and extend many familiar results from the Cournot model. I also show that differentiable comparative statics can remain valid when payoff functions contain kinks: equilibrium does not occur at the points where profits are non-differentiable.

I examine whether players reach equilibrium when they repeatedly adjust their actions through best replies or gradient dynamics. With two players and one-dimensional strategies, a broad class of adjustment processes converges. With three players, however, even strong restrictions on demand and costs do not guarantee stability: best-reply and gradient dynamics can display virtually unrestricted—and even chaotic—behaviour.