We present a model which combines elements of an auction and a rent-seeking contest. Players compete for a prize. Apart from exerting lobbying efforts, they also have to submit a bid which is payable only if they win the prize. First, we analyze the model if the returns-to-scale parameters of both bids and efforts are unity. We present a necessary and sufficient condition for the existence of a unique Nash equilibrium. In the equilibrium each player submits the same bid, while the sum of all efforts equals that bid. Second, we analyze the case in which the returns-to-scale parameters may differ from unity, and derive the implications of that specification.
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Paper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number
200005.
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Paper
Haan, M. & Schoonbeek, L., 2000.
"Auctions with rent seeking,"
Research Report
00F23, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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