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Effort and Performance in Public-Policy Contests

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  • Gil S. Epstein
  • Shmuel Nitzan

Abstract

Government intervention often gives rise to contests in which the possible ‘prizes’ are determined by the existing status-quo and some new public- policy proposal . In this paper we study the general class of such two-player public-policy contests and examine the effect of a change in the proposed policy, a change that may affect the payoffs of the two contestants, on their effort and performance. We extend the existing comparative statics studies that focus on the effect of changes either in the value of the prize in symmetric contests or in one of the contestants’ valuation of the prize in asymmetric contests. Our results hinge on the relationship between the strategic own-stake (“income”) effect and the strategic rival’s-stake (“substitution”) effect. This relationship is determined by three types of ability and stakes asymmetry between the contestants. In particular, we specify the asymmetry condition under which a more restrained government intervention that reduces the contestants’ prizes has the perverse effect of increasing their aggregate lobbying efforts.

Suggested Citation

  • Gil S. Epstein & Shmuel Nitzan, 2002. "Effort and Performance in Public-Policy Contests," CESifo Working Paper Series 634, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_634
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    References listed on IDEAS

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    1. Epstein, Gil S & Nitzan, Shmuel, 2002. "Stakes and Welfare in Rent-Seeking Contests," Public Choice, Springer, vol. 112(1-2), pages 137-142, July.
    2. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-739, September.
    3. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    4. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    5. Ellingsen, Tore, 1991. "Strategic Buyers and the Social Cost of Monopoly," American Economic Review, American Economic Association, vol. 81(3), pages 648-657, June.
    6. Gil S . Epstein & Shmuel Nitzan, 2002. "Endogenous Public Policy, Politicization and Welfare," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 661-677, October.
    7. Fabella, Raul V., 1995. "The social cost of rent seeking under countervailing opposition to distortionary transfers," Journal of Public Economics, Elsevier, vol. 57(2), pages 235-247, June.
    8. 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.
    9. Hurley, Terrance M, 1998. "Rent Dissipation and Efficiency in a Contest with Asymmetric Valuations," Public Choice, Springer, vol. 94(3-4), pages 289-298, March.
    10. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
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    Citations

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    Cited by:

    1. Veselov, D. & Yarkin, A., 2016. "Wealth Distribution and Political Conflict in the Model of Transition from Stagnation to Growth," Journal of the New Economic Association, New Economic Association, vol. 32(4), pages 30-60.
    2. Gil S. Epstein & Ira N. Gang, 2010. "A Political Economy of the Immigrant Assimilation: Internal Dynamics," Working Papers 2010-13, Bar-Ilan University, Department of Economics.
    3. Epstein, Gil S. & Mealem, Yosef & Nitzan, Shmuel, 2011. "Political culture and discrimination in contests," Journal of Public Economics, Elsevier, vol. 95(1), pages 88-93.
    4. Gil Epstein & Shmuel Nitzan & Mordechai Schwarz, 2008. "Performance and prize decomposition in contests," Public Choice, Springer, vol. 134(3), pages 429-443, March.
    5. Epstein, Gil S. & Gang, Ira N., 2006. "Decentralizing Aid with Interested Parties," WIDER Working Paper Series 006, World Institute for Development Economic Research (UNU-WIDER).
    6. Epstein, Gil S. & Mealem, Yosef, 2013. "Politicians, Governed vs. Non-Governed Interest Groups and Rent Dissipation," IZA Discussion Papers 7736, Institute for the Study of Labor (IZA).
    7. Epstein, Gil S. & Gang, Ira N., 2009. "Good governance and good aid allocation," Journal of Development Economics, Elsevier, vol. 89(1), pages 12-18, May.
    8. Gil S. Epstein & Yosef Mealem & Shmuel Nitzan, 2013. "Lotteries vs. All-Pay Auctions in Fair and Biased Contests," Economics and Politics, Wiley Blackwell, vol. 25(1), pages 48-60, March.
    9. Gil Epstein & Igal Milchtaich & Shmuel Nitzan & Mordechai Schwarz, 2007. "Ambiguous political power and contest efforts," Public Choice, Springer, vol. 132(1), pages 113-123, July.
    10. repec:ebl:ecbull:v:8:y:2005:i:10:p:1-10 is not listed on IDEAS
    11. Dmitriy Veselov & Alexander Yarkin, 2015. "The Great Divergence Revisited: Industrialization, Inequality and Political Conflict in the Unified Growth Model," HSE Working papers WP BRP 118/EC/2015, National Research University Higher School of Economics.
    12. Gil S. Epstein & Shmuel Nitzan, 2005. "Lobbying and Compromise," CESifo Working Paper Series 1413, CESifo Group Munich.
    13. Gil Epstein & Yosef Mealem, 2013. "Who gains from information asymmetry?," Theory and Decision, Springer, vol. 75(3), pages 305-337, September.
    14. Gil S. Epstein & Shmuel Nitzan, 2005. "Size and distribution of prizes and efforts in contests," Economics Bulletin, AccessEcon, vol. 8(10), pages 1-10.
    15. Gil Epstein & Yosef Mealem, 2015. "Politicians, governed versus non-governed interest groups and rent dissipation," Theory and Decision, Springer, vol. 79(1), pages 133-149, July.

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