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Political Culture and Discrimination in Contests

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Author Info

  • Epstein, Gil S.

    ()
    (Bar-Ilan University)

  • Mealem, Yosef

    ()
    (Netanya Academic College)

  • Nitzan, Shmuel

    ()
    (Bar-Ilan University)

Abstract

Many economic and political decisions are the outcome of strategic contests for a given prize. The nature of such contests can be determined by a designer who is driven by political considerations with a specific political culture. The main objective of this study is to analyze the effect of political culture and of valuation asymmetry on discrimination between the contestants. The weights assigned to the public well-being and the contestants’ efforts represent the political culture while discrimination is an endogenous variable that characterizes the mechanism allocating the prize. We consider situations under which the optimal bias of the designer is in favor of the contestant with the larger or smaller prize valuation and examine the effect of changes in the political culture and in valuation asymmetry on the designer's preferred discrimination between the contestants. Focusing on the two most widely studied types of contest success functions (deterministic all-pay-auctions and logit CSFs), we show that an all-pay auction is always the preferred CSF from the point of view of the contest designer. This result provides a new political-economic micro foundation to some of the most commonly used models in the contest literature.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5158.

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Length: 29 pages
Date of creation: Aug 2010
Date of revision:
Publication status: published in: Journal of Public Economics, 2011, 95 (1-2), 88-93
Handle: RePEc:iza:izadps:dp5158

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Keywords: all-pay-auction; political culture; logit contest success function; contests; discrimination;

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References

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  1. Nti, Kofi O., 2004. "Maximum efforts in contests with asymmetric valuations," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1059-1066, November.
  2. Nitzan, Shmuel & Ueda, Kaoru, 2009. "Collective contests for commons and club goods," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 48-55, February.
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  7. Nti, Kofi O, 1997. "Comparative Statics of Contests and Rent-Seeking Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 43-59, February.
  8. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
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  10. Gradstein, Mark & Konrad, Kai A, 1999. "Orchestrating Rent Seeking Contests," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(458), pages 536-45, October.
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  13. Gradstein, Mark, 1998. "Optimal contest design: volume and timing of rent seeking in contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 575-585, November.
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  23. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199549603, October.
  24. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
  25. Nava Kahana & Shmuel Nitzan, 2002. "Pre-assigned rents and bureaucratic friction," Economics of Governance, Springer, vol. 3(3), pages 241-248, November.
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