Rent-seeking with scarce talent: a model of preemptive hiring
In the standard model of a rent-seeking contest, firms optimally employ resources in an attempt to win the contest and obtain the rent. Typically, it is assumed that these resources may be hired at any desired level at some fixed, exogenous per-unit cost. In many real-world rent-seeking contests, however, these resources consist of scarce, talented individuals. We model a rentseeking contest in which the talent available for employment is scarce and in which the rent obtained from winning the contest may also differ from participant to participant. Talent scarcity leads to preemptive hiring by the player receiving the larger rent. In the traditional analysis, as the size of the rents converges, the levels of effort and the probability of winning also converge. By contrast, when talent is scarce, the player receiving the larger rent hires it all and wins the contest with probability 1. This is true even if the difference in rents is small. Interestingly, this outcome may be Pareto-inferior to the outcome associated with the interior Nash equilibrium. We also characterize the condition under which talent ceases to be scarce. For a simple rentseeking game, this requires at least 50% more talent than is employed at the interior Nash equilibrium.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James D. Whitney, 2005. "The Peculiar Externalities of Professional Team Sports," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 330-343, April.
- Epstein, Gil S & Nitzan, Shmuel, 2002. " Stakes and Welfare in Rent-Seeking Contests," Public Choice, Springer, vol. 112(1-2), pages 137-42, July.
- Schoonbeek, Lambert, 2004.
"Delegation in a group-contest,"
European Journal of Political Economy,
Elsevier, vol. 20(1), pages 263-272, March.
- Schoonbeek, Lambert, 2002. "Delegation in a group-contest," Research Report 02F03, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Schoonbeek, Lambert, 2002. "Delegation in a group-contest," CCSO Working Papers 200201, University of Groningen, CCSO Centre for Economic Research.
- Edward P. Lazear & Sherwin Rosen, 1979.
"Rank-Order Tournaments as Optimum Labor Contracts,"
NBER Working Papers
0401, National Bureau of Economic Research, Inc.
- Frederic Palomino & Jozsef Sakovics, 2004.
"Inter-league competition for talent vs. competitive balance,"
ESE Discussion Papers
96, Edinburgh School of Economics, University of Edinburgh.
- Palomino, Frederic & Sakovics, Jozsef, 2004. "Inter-league competition for talent vs. competitive balance," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 783-797, June.
- Baik, Kyung Hwan & Kim, In-Gyu, 1997. "Delegation in contests," European Journal of Political Economy, Elsevier, vol. 13(2), pages 281-298, May.
- Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
- Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
- Tollison, Robert D, 1982. "Rent Seeking: A Survey," Kyklos, Wiley Blackwell, vol. 35(4), pages 575-602.
- Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
- Stefan Szymanski & Stefan KÈsenne, 2004.
"Competitive balance and gate revenue sharing in team sports,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 52(1), pages 165-177, 03.
- SZYMANSKI, Stefan & KÉSENNE, Stefan, 2003. "Competitive balance and gate revenue sharing in team sports," Working Papers 2003003, University of Antwerp, Faculty of Applied Economics.
- Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991.
"Rigging The Lobbying Process: An Application Of The All- Pay Auction,"
Purdue University Economics Working Papers
1002, Purdue University, Department of Economics.
- 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.
- Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
- Loury, Glenn C, 1979.
"Market Structure and Innovation,"
The Quarterly Journal of Economics,
MIT Press, vol. 93(3), pages 395-410, August.
- Plott, Charles R, 1987. "Legal Fees: A Comparison of the American and English Rules," Journal of Law, Economics and Organization, Oxford University Press, vol. 3(2), pages 185-92, Fall.
- Tullock, Gordon, 1975. "On the Efficient Organization of Trials," Kyklos, Wiley Blackwell, vol. 28(4), pages 745-62.
- Sherwin Rosen, 1985.
"Prizes and Incentives in Elimination Tournaments,"
NBER Working Papers
1668, National Bureau of Economic Research, Inc.
- Arye L. Hillman & John G. Riley, 1987.
"Politically Contestable Rents and Transfers,"
UCLA Economics Working Papers
452, UCLA Department of Economics.
- Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
- Farmer, Amy & Pecorino, Paul, 1999. " Legal Expenditure as a Rent-Seeking Game," Public Choice, Springer, vol. 100(3-4), pages 271-88, September.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0505002. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.