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The Effect of Limited Search Ability on the Quality of Competitive Rent-Seeking Clubs

Author

Listed:
  • Shmuel Nitzan

    (Bar-Ilan University)

  • Kobi Kriesler

    (Bar-Ilan University)

Abstract

A competitive rent-seeking club (CRSC) offers its members the chance of winning a prize (status, position, privilege) by being selected, typically, by a civil servant or a politician. The selector replaces in our setting the usual contest success function; instead of determining the winner on the basis of the club-members' efforts, he selects the winner on the basis of quality. This paper focuses on the effect of incomplete search of the selector on the efficiency of democratic self-governing and decentralized RSC's that control admittance to the club and its transparency, assuming that quality of their members is fixed. The incomplete search of the selector is assumed to take the simple form of fixed random sampling of the contestants - the members of the CRSC. Our results imply that, even when active rent-seeking expenditures are disregarded, the decisions of CRSC's regarding their composition and transparency tend to reduce quality and are therefore inefficient.

Suggested Citation

  • Shmuel Nitzan & Kobi Kriesler, 2010. "The Effect of Limited Search Ability on the Quality of Competitive Rent-Seeking Clubs," Working Papers 2010-06, Bar-Ilan University, Department of Economics.
    • Handle: RePEc:biu:wpaper:2010-06
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    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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