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Biased contests

  • Matthias Dahm

    ()

  • Nicolás Porteiro

    ()

We examine the effects of providing more accurate information to a political decision-maker who is lobbied by competing interests. Conventional wisdom holds that such a bias in the direction of the correct decision improves the efficiency of government. We provide a formal definition of bias which is derived from the same fundamentals that give rise to a contest model of lobbying. Efficiency of government is measured by both the probability of taking the correct decision and the amount of social waste associated to lobbying activities. We present a benchmark model in which increasing the bias always improves the efficiency of government under both criteria. However, this result is fragile in the sense that reasonable alternative assumptions in the micro-foundations lead to slightly different models in which -due to different strategic effects of bias- under either criterion there is no guarantee that more accurate information improves government.

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File URL: http://hdl.handle.net/10.1007/s11127-008-9278-x
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Article provided by Springer in its journal Public Choice.

Volume (Year): 136 (2008)
Issue (Month): 1 (July)
Pages: 55-67

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Handle: RePEc:kap:pubcho:v:136:y:2008:i:1:p:55-67
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  1. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer, vol. 8(2), pages 291-305.
  2. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
  3. Matthias Dahm & Nicolás Porteiro, 2008. "Informational lobbying under the shadow of political pressure," Social Choice and Welfare, Springer, vol. 30(4), pages 531-559, May.
  4. Timothy Feddersen & Wolfgang Pesendorfer, 1996. "Convicting the Innocent: The Inferiority of Unanimous Jury Verdicts," Discussion Papers 1170, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Perez-Castrillo, J David & Verdier, Thierry, 1992. " A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-50, April.
  6. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-94, March.
  7. Matthias Dahm & Nicolás Porteiro, 2008. "Side Effects of Campaign Finance Reform," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1057-1077, 09.
  8. J. Amegashie, 2006. "A contest success function with a tractable noise parameter," Public Choice, Springer, vol. 126(1), pages 135-144, January.
  9. Che, Yeon-Koo & Gale, Ian, 2000. "Difference-Form Contests and the Robustness of All-Pay Auctions," Games and Economic Behavior, Elsevier, vol. 30(1), pages 22-43, January.
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  11. Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
  12. Luis Corchón & Matthias Dahm, 2010. "Foundations for contest success functions," Economic Theory, Springer, vol. 43(1), pages 81-98, April.
  13. Bennedsen, Morten & Feldmann, Sven E., 2006. "Informational lobbying and political contributions," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 631-656, May.
  14. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 10-93-9, Pennsylvania State - Department of Economics.
  15. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  16. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  17. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  18. Christian Riis & Derek J. Clark, 1997. "Contest success functions: an extension," Economic Theory, Springer, vol. 11(1), pages 201-204.
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