‘Stuck in the Middle’ of Enforcement: (Sub-)Optimal Deterrence of Workplace Sabotage & The Attack-and-Defense Conflict with the Gun-and-Butter Dilemma; Subhasish Chowdhury (University of Bath, UK)

Abstract
Title: ‘Stuck in the Middle’ of Enforcement: (Sub-)Optimal Deterrence of Workplace Sabotage

We investigate theoretically the effects of punitive fine for sabotage behavior in organizations. We consider a two stage game in which possible heterogeneous agents are involved in a logit-form contest in the first stage. In the second stage, they can observe and reduce the effort of the opponent by incurring sabotage. The principal can impose a fine on detected sabotage behavior. We fully characterize the equilibria and show that sabotage indeed decreases with an increase in the fine level. However, the relationship between fine and effort (and payoff) are non-monotonic. In specific, as an unintended consequence, for an intermediate level of fine the total effort may decrease substantially.

Title: The Attack-and-Defense Conflict with the Gun-and-Butter Dilemma
We analyze a general equilibrium model of attack and defense. One attacker and one defender allocate their fixed endowments either to produce gun or to produce butter, and the amount of guns produced determines the winner in the conflict. If the attacker wins, then s/he appropriates all the butter produced in the economy; otherwise, each consume only their own butter. We characterize the unique interior and unique corner equilibrium for this game. Defenders may spend more on conflict than the attacker even without loss aversion, attackers may expend all their resources only in conflict, and the interior and corner equilibria cannot coexist.