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Rent-seeking contests with independent private values

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  • Christian Ewerhart

Abstract

We consider symmetric rent-seeking contests with independent private valuations of the contest prize. For a two-parameter specification with continuous types, we fully characterize the Bayesian equilibrium, and study its basic properties. The willingness to waste is a hump-shaped function of the private valuation, with the median type expending the highest share of her valuation. A first-order (second-order) stochastic increase in the common type distribution raises (lowers) ex-ante expected efforts. However, neither first order nor second-order stochastic dominance in valuations necessarily leads to a first-order stochastic dominance ranking in efforts. We also show that, as uncertainty vanishes, the Bayesian equilibrium converges to the Nash equilibrium of the model with complete information.

Suggested Citation

  • Christian Ewerhart, 2010. "Rent-seeking contests with independent private values," IEW - Working Papers 490, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:490
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    File URL: https://www.econ.uzh.ch/apps/workingpapers/wp/iewwp490.pdf
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    References listed on IDEAS

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    1. David A. Malueg & Andrew J. Yates, 2004. "Sent Seeking With Private Values," Public Choice, Springer, vol. 119(1_2), pages 161-178, April.
    2. Mark Fey, 2008. "Rent-seeking contests with incomplete information," Public Choice, Springer, vol. 135(3), pages 225-236, June.
    3. 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.
    4. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    5. Hurley, Terrance M. & Shogren, Jason F., 1998. "Asymmetric information contests," European Journal of Political Economy, Elsevier, vol. 14(4), pages 645-665, November.
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    Cited by:

    1. Andrea Gallice, 2013. "Rent-seeking contests with private values and common knowledge about the mean," Working papers 023, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    2. Cédric Wasser, 2013. "Incomplete information in rent-seeking contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 239-268, May.
    3. Thomas Giebe & Paul Schweinzer, 2015. "Probabilistic procurement auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 19(1), pages 25-46, March.
    4. Stracke, Rudi & Höchtl, Wolfgang & Kerschbamer, Rudolf & Sunde, Uwe, 2014. "Optimal prizes in dynamic elimination contests: Theory and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 102(C), pages 43-58.
    5. Metzger, Lars P., 2015. "Alliance Formation in Contests with Incomplete Information," Ruhr Economic Papers 544, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Häfner, Samuel, 2017. "A tug-of-war team contest," Games and Economic Behavior, Elsevier, vol. 104(C), pages 372-391.
    7. Stracke, Rudi & Kerschbamer, Rudolf & Sunde, Uwe, 2017. "Coping with complexity – Experimental evidence for narrow bracketing in multi-stage contests," European Economic Review, Elsevier, vol. 98(C), pages 264-281.
    8. repec:zbw:rwirep:0544 is not listed on IDEAS
    9. Lars P. Metzger, 2015. "Alliance Formation in Contests with Incomplete Information," Ruhr Economic Papers 0544, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Florian Baumann & Tim Friehe, 2012. "Emotions in litigation contests," Economics of Governance, Springer, vol. 13(3), pages 195-215, September.
    11. Marco Serena, 2017. "Harnessing Beliefs to Stimulate Efforts; on the Optimal Disclosure Policy in Contests," Working Papers tax-mpg-rps-2018-11, Max Planck Institute for Tax Law and Public Finance.
    12. Andrea Gallice, 2014. "Rent-seeking contests with private valuations," Carlo Alberto Notebooks 390, Collegio Carlo Alberto.
    13. Stracke, Rudi & Sunde, Uwe, 2014. "Dynamic Incentive Effects of Heterogeneity in Multi-Stage Promotion Contests," IZA Discussion Papers 8368, Institute of Labor Economics (IZA).
    14. Thomas Giebe & Paul Schweinzer, 2012. "Fuzzy Price-Quality Ratio Procurement under Incomplete Information," Discussion Papers 12/26, Department of Economics, University of York.
    15. Marco Serena, 2022. "Harnessing beliefs to optimally disclose contestants’ types," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(3), pages 763-792, October.

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    More about this item

    Keywords

    Rent seeking; conflict; independent private valuations; first-order stochastic dominance; mean-preserving spread.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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