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Biased Contests

  • Matthias Dahm

    ()

    (Universidad Carlos III de Madrid)

  • Nicolás Porteiro

    ()

    (Department of Economics, Universidad Pablo de Olavide)

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://www.upo.es/serv/bib/wps/econ0621.pdf
File Function: First version, 2006
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Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 06.21.

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Length: 23 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:pab:wpaper:06.21
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  1. Bennedsen, Morten & Feldmann, Sven E., 2000. "Informational Lobbying And Political Contributions," Working Papers 08-2000, Copenhagen Business School, Department of Economics.
  2. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "The All-Pay Auction With Complete Information," Purdue University Economics Working Papers 1007, Purdue University, Department of Economics.
  3. Baye, M.R. & Kovenock, D., 1993. "The Solution to the Tullock Rent-Seeking Game When R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 9368, Tilburg - Center for Economic Research.
  4. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  5. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  6. Richard Cornes & Roger Hartley, 2005. "Asymmetric contests with general technologies," Economic Theory, Springer, vol. 26(4), pages 923-946, November.
  7. 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.
  8. Christian Riis & Derek J. Clark, 1997. "Contest success functions: an extension," Economic Theory, Springer, vol. 11(1), pages 201-204.
  9. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  10. Matthias Dahm & Nicolas Porteiro, 2005. "Informational Lobbying under the Shadow of Political Pressure," Discussion Papers 1409, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Che,Y.K. & Gale,I., 1998. "Difference-form contests and the robustness of all-pay auctions," Working papers 6, Wisconsin Madison - Social Systems.
  12. 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.
  13. Luis Corchon & Matthias Dahm, 2007. "Foundations For Contest Success Functions," Economics Working Papers we070401, Universidad Carlos III, Departamento de Economía.
  14. Matthias Dahm & Nicolas Porteiro, 2005. "Side Effects of Campaign Finance Reform," Discussion Papers 1408, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Perez-Castrillo, J David & Verdier, Thierry, 1992. " A General Analysis of Rent-Seeking Games," Public Choice, Springer, vol. 73(3), pages 335-50, April.
  16. 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.
  17. J. Amegashie, 2006. "A contest success function with a tractable noise parameter," Public Choice, Springer, vol. 126(1), pages 135-144, January.
  18. 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.
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