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Asymmetry and Corrective Public Policy in Contests

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  • Epstein, Gil S
  • Nitzan, Shmuel

Abstract

The proposal of an inefficient policy usually stimulates a political struggle between the affected interest groups. The resulting wasteful lobbying activities may reduce welfare, even if the proposed policy is not approved. In this paper we show that sufficient asymmetry in payoffs not only tends to reduce lobbying efforts in standard rent-seeking contests, as is well known, but it is, in fact, a necessary condition for the implementation of a successful effective corrective tax-transfer policy that complements the proposal of the inefficient policy. Such a policy induces an efficient equilibrium outcome which is, in addition, optimal from the viewpoint of the players that take part in the public-policy game. Copyright 2002 by Kluwer Academic Publishers

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  • Epstein, Gil S & Nitzan, Shmuel, 2002. "Asymmetry and Corrective Public Policy in Contests," Public Choice, Springer, vol. 113(1-2), pages 231-240, October.
  • Handle: RePEc:kap:pubcho:v:113:y:2002:i:1-2:p:231-40
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    Cited by:

    1. Dmitry Ryvkin, 2007. "Tullock contests of weakly heterogeneous players," Public Choice, Springer, vol. 132(1), pages 49-64, July.
    2. Gil Epstein & Yosef Mealem, 2013. "Who gains from information asymmetry?," Theory and Decision, Springer, vol. 75(3), pages 305-337, September.
    3. ISKAKOV, Mikhail & ISKAKOV, Alexey & ZAKHAROV, Alexey, 2014. "Equilibria in secure strategies in the Tullock contest," CORE Discussion Papers 2014010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Ian A. MacKenzie, 2009. "Controlling externalities in the presence of rent seeking," CER-ETH Economics working paper series 09/111, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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