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Effort and Performance in Public Policy Contests

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  • GIL S. EPSTEIN
  • SHMUEL NITZAN

Abstract

Government intervention often gives rise to contests in which the possible "prizes" are determined by the status quo and some new public policy proposal. In this paper we study a general class of such two-player public policy contests and examine the effect of a change in the proposed policy, a change that may affect the payoffs of the two contestants, on their effort and performance. Our results extend the existing comparative statics studies that focus, in symmetric contests, on the effect of a change in the value of the prize or, in asymmetric contests, on the effect of one contestant's valuation of the prize. Our results hinge on a fundamental equation that specifies the equilibrium relationship between the strategic own-stake effect and the strategic rival's-stake effect. This fundamental equation clarifies the role of the three possible types of ability and stake asymmetry in determining the effect of payoff variations on the efforts and performance of the contestants. Copyright 2006 Blackwell Publishing Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 8 (2006)
Issue (Month): 2 (05)
Pages: 265-282

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Handle: RePEc:bla:jpbect:v:8:y:2006:i:2:p:265-282

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  1. Epstein, Gil S & Nitzan, Shmuel, 2002. " Stakes and Welfare in Rent-Seeking Contests," Public Choice, Springer, Springer, vol. 112(1-2), pages 137-42, July.
  2. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, Elsevier, vol. 10(1), pages 41-60, May.
  3. Gil S . Epstein & Shmuel Nitzan, 2002. "Endogenous Public Policy, Politicization and Welfare," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 661-677, October.
  4. Skaperdas, S., 1991. "Cooperation, Conflict And Power In The Absence Of Property Rights," Papers, California Irvine - School of Social Sciences 90-91-06a, California Irvine - School of Social Sciences.
  5. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers, UCLA Department of Economics 452, UCLA Department of Economics.
  6. Ellingsen, T., 1990. "Strategic Buyers and the Social Cost of Monopoly," Papers, Norwegian School of Economics and Business Administration- 05-90, Norwegian School of Economics and Business Administration-.
  7. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, Springer, vol. 7(2), pages 283-90, February.
  8. Hurley, Terrance M, 1998. " Rent Dissipation and Efficiency in a Contest with Asymmetric Valuations," Public Choice, Springer, Springer, vol. 94(3-4), pages 289-98, March.
  9. Fabella, Raul V., 1995. "The social cost of rent seeking under countervailing opposition to distortionary transfers," Journal of Public Economics, Elsevier, Elsevier, vol. 57(2), pages 235-247, June.
  10. Hurley, Terrance M. & Shogren, Jason F., 1998. "Effort levels in a Cournot Nash contest with asymmetric information," Journal of Public Economics, Elsevier, Elsevier, vol. 69(2), pages 195-210, June.
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