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Infinitely repeated contests: How strategic interaction affects the efficiency of governance

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  • Sherrill Shaffer
  • Jason Shogren

Abstract

Contests over the scope and strength of regulation and governance are commonplace – and commonly repeated. The same players vie for the same government prize year after year: for example, environmental standards, government contracts, research grants, and public good provision. The open question is whether more rents are dissipated in repeated regulatory contests than onetime competitions. This question matters for regulation and governance because societies should design policies to waste the fewest scarce resources. According to some, the answer is “no”, but others say “yes”– more resources are wasted when people compete repeatedly for the same government prize. Herein, we use two game theoretic equilibrium concepts to help untangle the answer. Our results suggest non‐myopic contestants are more likely to behave as partners than rivals – provided the context is relatively sterile. Several common complications help break up the tacit partnership, including a disparity in relative ability, a shrinking prize, and additional players.

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  • Sherrill Shaffer & Jason Shogren, 2008. "Infinitely repeated contests: How strategic interaction affects the efficiency of governance," Regulation & Governance, John Wiley & Sons, vol. 2(2), pages 234-252, June.
    • Handle: RePEc:wly:reggov:v:2:y:2008:i:2:p:234-252
    DOI: 10.1111/j.1748-5991.2008.00036.x
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    Cited by:

    1. James W. Boudreau & Shane Sanders & Nicholas Shunda, 2019. "The role of noise in alliance formation and collusion in conflicts," Public Choice, Springer, vol. 179(3), pages 249-266, June.
    2. James Lake & Maia K. Linask, 2013. "The near-equivalence of tariffs and quotas," Departmental Working Papers 1305, Southern Methodist University, Department of Economics.
    3. Ian A. MacKenzie, 2009. "Controlling externalities in the presence of rent seeking," CER-ETH Economics working paper series 09/111, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    4. Martin Grossmann, 2011. "Endogenous Liquidity Constraints in a Dynamic Contest," Working Papers 0148, University of Zurich, Institute for Strategy and Business Economics (ISU).
    5. Boudreau, James W. & Shunda, Nicholas, 2015. "Tacit Collusion in Repeated Contests with Noise," MPRA Paper 65671, University Library of Munich, Germany.

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