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Contractual Incentive Provision and Commitment in Rent-Seeking Contests

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Author Info
Oliver Gürtler (Department of Economics, BWL II, University of Bonn, Adenauerallee 24-42, D-53113 Bonn, Germany. Tel.:+49-228-739214, Fax:+49-228-739210. oliver.guertler@uni-bonn.de)
Abstract

In this paper, we consider a symmetric rent-seeking contest, where employees lobby for a governmental contract on behalf of .rms. The only verifiable information is which firm is assigned the contract. We derive the optimal wage contracts of the employees and analyze, whether commitment by determining the wage contract prior to the competitor is profitable. This is indeed the case, i.e. firms prefer to move first in the wage-setting subgame. This complements previous work on rent-seeking contests emphasizing that commitment via rent-seeking expenditures is unprofitable in symmetric contests.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 100.

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Date of creation: Mar 2006
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Handle: RePEc:trf:wpaper:100

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Related research
Keywords: Contest; First-Mover Advantage; Commitment; Wage Contract;

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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