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Rent-seeking contests with independent private values

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  • Christian Ewerhart

Abstract

We consider symmetric rent-seeking contests with independent private valuations of the contest prize. For a two-parameter specification with continuous types, we fully characterize the Bayesian equilibrium, and study its basic properties. The willingness to waste is a hump-shaped function of the private valuation, with the median type expending the highest share of her valuation. A first-order (second-order) stochastic increase in the common type distribution raises (lowers) ex-ante expected efforts. However, neither first-order nor second-order stochastic dominance in valuations necessarily leads to a first-order stochastic dominance ranking in efforts. We also show that, as uncertainty vanishes, the Bayesian equilibrium converges to the Nash equilibrium of the model with complete information.

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Bibliographic Info

Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 490.

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Date of creation: Jun 2010
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Handle: RePEc:zur:iewwpx:490

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Keywords: Rent seeking; conflict; independent private valuations; first-order stochastic dominance; mean-preserving spread;

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References

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  1. Hurley, Terrance M. & Shogren, Jason F., 1998. "Asymmetric information contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 645-665, November.
  2. Mark Fey, 2008. "Rent-seeking contests with incomplete information," Public Choice, Springer, vol. 135(3), pages 225-236, June.
  3. David A. Malueg & Andrew J. Yates, 2004. "Sent Seeking With Private Values," Public Choice, Springer, vol. 119(1_2), pages 161-178, 04.
  4. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  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.
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Cited by:
  1. Florian Baumann & Tim Friehe, 2012. "Emotions in litigation contests," Economics of Governance, Springer, vol. 13(3), pages 195-215, September.
  2. Andrea Gallice, 2013. "Rent-seeking contests with private values and common knowledge about the mean," Working papers 023, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
  3. Stracke, Rudi & Höchtl, Wolfgang & Kerschbamer, Rudolf & Sunde, Uwe, 2014. "Optimal prizes in dynamic elimination contests: Theory and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 102(C), pages 43-58.
  4. Thomas Giebe & Paul Schweinzer, 2012. "Fuzzy Price-Quality Ratio Procurement under Incomplete Information," Discussion Papers 12/26, Department of Economics, University of York.
  5. Thomas Giebe & Paul Schweinzer, 2013. "Probabilistic Procurement Auctions," CESifo Working Paper Series 4320, CESifo Group Munich.
  6. Wasser, Cédric, 2010. "Rent-seeking Contests under Symmetric and Asymmetric Information," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 311, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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