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Rent-seeking Contests under Symmetric and Asymmetric Information

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  • Wasser, Cédric

Abstract

We consider a variant of the Tullock rent-seeking contest. Under symmetric information we determine equilibrium strategies and prove their uniqueness. Then, we assume contestants to be privately informed about their costs of effort. We prove existence of a pure-strategy equilibrium and provide a sufficient condition for uniqueness. Comparing different informational settings we find that if players are uncertain about the costs of all players, aggregate effort is lower than under both private and complete information. Yet, under additional assumptions, rent dissipation is still smaller in the latter settings. Numerical examples illustrate that there is no general ranking between private and complete information. The results depend on the distribution costs are drawn from and on the exact specification of the contest success function.

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Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 311.

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Date of creation: Mar 2010
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Handle: RePEc:trf:wpaper:311

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Keywords: Rent-seeking; Contest; Asymmetric Information; Private values;

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  1. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
  2. Richard Cornes & Roger Hartley, 2005. "Asymmetric contests with general technologies," Economic Theory, Springer, vol. 26(4), pages 923-946, November.
  3. J. Amegashie, 2006. "A contest success function with a tractable noise parameter," Public Choice, Springer, vol. 126(1), pages 135-144, January.
  4. Krishna, Vijay & Morgan, John, 1997. "An Analysis of the War of Attrition and the All-Pay Auction," Journal of Economic Theory, Elsevier, vol. 72(2), pages 343-362, February.
  5. Hurley, Terrance M. & Shogren, Jason F., 1998. "Effort levels in a Cournot Nash contest with asymmetric information," Journal of Public Economics, Elsevier, vol. 69(2), pages 195-210, June.
  6. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
  7. Athey, S., 1997. "Sigle Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Working papers 97-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Hurley, Terrance M. & Shogren, Jason F., 1998. "Asymmetric information contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 645-665, November.
  9. Szidarovszky, Ferenc & Okuguchi, Koji, 1997. "On the Existence and Uniqueness of Pure Nash Equilibrium in Rent-Seeking Games," Games and Economic Behavior, Elsevier, vol. 18(1), pages 135-140, January.
  10. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
  11. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  12. Mark Fey, 2008. "Rent-seeking contests with incomplete information," Public Choice, Springer, vol. 135(3), pages 225-236, June.
  13. Morath, Florian & Münster, Johannes, 2008. "Private versus complete information in auctions," Economics Letters, Elsevier, vol. 101(3), pages 214-216, December.
  14. Ryvkin, Dmitry, 2010. "Contests with private costs: Beyond two players," European Journal of Political Economy, Elsevier, vol. 26(4), pages 558-567, December.
  15. Christian Ewerhart, 2010. "Rent-seeking contests with independent private values," IEW - Working Papers 490, Institute for Empirical Research in Economics - University of Zurich.
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Cited by:
  1. Einy, E & Haimanko, O & Moreno, D & Sela, A & Shitovitz, B, 2013. "Tullock Contests with Asymmetric Information," Discussion Papers 2013-11, Graduate School of Economics, Hitotsubashi University.
  2. Alexander Matros & Alex Possajennikov, . "Common Value Allocation Mechanisms with Private Information: Lotteries or Auctions?," Discussion Papers 2014-07, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  3. Ezra Einy & Ori Haimanko & Diego Moreno & A. Sela & Benyamin Shitovitz, 2013. "Tullock contests with asymmetric information," Economics Working Papers we1314, Universidad Carlos III, Departamento de Economía.
  4. Ezra Einy & Ori Haimanko & Diego Moreno & Aner Sela & Benyamin Shitovitz, 2013. "Tullock Contests With Asymmetric Information," Working Papers 1303, Ben-Gurion University of the Negev, Department of Economics.
  5. Ezra Einy & Diego Moreno & Benyamin Shitovitz, 2014. "The value of public information in common value Tullock contests," Economics Working Papers we1401, Universidad Carlos III, Departamento de Economía, revised Mar 2014.
  6. Thomas Giebe & Paul Schweinzer, 2013. "Probabilistic Procurement Auctions," CESifo Working Paper Series 4320, CESifo Group Munich.
  7. Thomas Giebe & Paul Schweinzer, 2012. "Fuzzy Price-Quality Ratio Procurement under Incomplete Information," Discussion Papers 12/26, Department of Economics, University of York.

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