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Political culture and discrimination in contests

  • Epstein, Gil S.
  • Mealem, Yosef
  • Nitzan, Shmuel

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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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 1-2 (February)
Pages: 88-93

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:1-2:p:88-93
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  2. Moldovanu, Benny & Sela, Aner, 1999. "The Optimal Allocation of Prizes in Contests," Sonderforschungsbereich 504 Publications 99-75, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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  19. Dasgupta, Ani & Nti, Kofi O., 1998. "Designing an optimal contest," European Journal of Political Economy, Elsevier, vol. 14(4), pages 587-603, November.
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  23. 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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  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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