Contests, queues, and quotas: Four essays in applied microeconomics

This thesis consists of four essays: The first essay offers a potential explanation for why popular night clubs (restaurants) with excess demand (i.e., queues) do not raise prices or increase supply. Becker (1991) uses the social influence of a consumption externality or "bandwagon effect" to explain this puzzle. However, he admits that his explanation may be weak. In this essay, we present a formal analysis of Becker's argument based on a different kind of social influence (i.e., misery loves company). We also offer an alternative explanation of why some night clubs (restaurants) are popular and others are not. While Becker (1991) includes market demand and the gap between market demand and supply as separate arguments in the customers' demand function to explain why supply and price are not increased, we only include the gap between demand and supply in the customers' utility function to explain both puzzles. Although the essay focuses on night clubs (restaurants), it should be seen as a contribution to the broader literature of why some markets apparently do not clear or why some goods are rationed.;The second essay examines the existence of pure-strategy equilibria in all-pay auctions. It is a standard result that there is no equilibrium in pure-strategies in an all-pay auction. In this essay, an all-pay auction where the valuations of the contestants is a function of their bids (expenditures) is presented. It is shown that there exists a unique Nash equilibrium in pure strategies under certain conditions.;The third essay examines a model in which the number of immigrants allowed into a country is the outcome of a costly political lobbying process between a firm and a union. The union and the firm bargain over the wage of natives after the number of immigrants that will be permitted is known. Two contest success functions are examined: one in which the lobbyist with the higher effort is not necessarily the winner and another in which the lobbyist with the higher effort wins with certainty (i.e., the all-pay auction). Comparative statics results are derived to show how the reservation wage of immigrants, the size of the union, the sensitivity of the legislature to lobbying, the reservation wage of natives, the price of the firm's product and the firm's bargaining power affect immigration quotas and the post-immigration wage of natives.;The final essay examines the equilibrium of an all-pay auction when a committee awards the prize or when the contest is over multiple dimensions. We find pure and mixed strategy equilibria in an all-pay auction under committee administration with caps on the bids of contestants. We argue that the cap is not an artificial restriction on the game, given that there are caps on political lobbying in the real world. We find that committee administration could result in higher aggregate expenditures (relative to expenditures under one-person administration), even if there is some probability that the committee will not award the prize. The intuition for this result is that the inclusion of additional administrators relaxes the effect of caps on lobbying. That is, caps on lobbying tend to be more effective the smaller is the size of the committee.