Information feedback and contest structure in rent-seeking games

We investigate the effects of information feedback in rent-seeking games with two different contest structures. In the share contest a contestant receives a share of the rent equal to her share of rent-seeking expenditures, while in the lottery contest a contestant wins the entire rent with probability equal to her share of rent-seeking expenditures. In share contests average expenditures converge to equilibrium levels when subjects only get feedback about own earnings, and additional feedback about rivals' choices and earnings raises average expenditures. In lottery contests information feedback has an opposite, and even stronger, effect: when subjects only get feedback on own earnings we observe high levels of rent dissipation, usually exceeding the value of the rent, and additional feedback about rivals' choices and earnings has a significant moderating influence on expenditures. In a follow-up treatment we make information feedback endogenous by allowing contestants in a lottery contest to make public or private expenditures. Subjects make the vast majority of expenditures privately and overall excess expenditures are similar to the lottery contest with own feedback.     

The impact of management incentives in intergroup contests

In intergroup contests a manager advises and motivates her group’s members. Her rewards often depend on the subsequent contest expenditure of the members. I test whether such incentives undermine the credibility and effectiveness of a manager’s efforts. In the different experimental treatments the managers either benefit from very high or low expenditure or get a predetermined payment. The results show that different management incentives shape the expenditure of the group members even if managers have an advisory role only. However, group members follow recommendations more closely if management compensation is not linked to contest expenditures.     

Collective Trust Behavior*

This paper investigates trust behavior in situations where decision‐makers are large groups and the decision mechanism is collective. Theories from behavioral economics and psychology suggest that trust in such situations may differ from interindividual trust. The experimental results here reveal a large difference in trust but not in trustworthiness between the individual and collective setting. Furthermore, a field experiment captures the determinants of collective trust behavior among two Swedish cohorts. Beliefs about the other group and one's own group are strongly associated with collective trustworthiness and trust behavior.     

Difference-Form Contests and the Robustness of All-Pay Auctions

In much of the existing literature on rent-seeking games, the outcome of the contest is either infinitely sensitive or relatively insensitive to contestants' efforts. The current paper presents a family of contest games that permit characterization of equilibrium for all levels of sensitivity of the outcome to contestants' efforts. Specifically, the outcome of the contest depends on the difference between efforts, which encompass the lottery and the all-pay auction as polar cases. The equilibrium converges to that of the all-pay auction as the probability of winning the prize grows infinitely sensitive to one's effort, and the main qualitative features of equilibrium persist over a large parameter region. Journal of Economic Literature Classification Numbers: D44, D72.     

RENT-SEEKING FIRMS AND CONSUMERS: AN EQUILIBRIUM ANALYSIS*

This paper examines the probability of success in a rent-seeking contest as a general function of the resources that both firms and consumers devote to lobbying the government. The object of lobbying is a possible restriction of market supply, where the likelihood that supply will be restricted to a given extent depends on everyone's lobbying efforts. In equilibrium the expected social loss due to rent-seeking activities is at most equal to the size of the contested rent, and this upper bound does not depend on the active participation of consumers in the contest. Markets in which supply is not restricted may also be associated with rent-seeking waste. Finally, consumers' rent-seeking efforts are shown to be socially productive, both on the margin and in total.     

Endogenous entry in contests

We report the results of laboratory experiments on rent-seeking contests with endogenous participation. Theory predicts that (a) contest entry and rent-seeking expenditures increase with the size of the prize and (b) earnings are equalized between the contest and the outside option. While the directional predictions offered in (a) are supported in the data, the level predictions are not. Prediction (b) is not supported in the data: when the prize is large, contest participants earn more than the outside option. When the prize is small, contest participants earn less. Previous studies of gender and contest competition suggest that females should (a) not perform as well in the contest; and (b) enter at a lower rate. We find some support for (a) but not for (b). Women participate in the contest at the same rate as men.     

Effort and performance in group contests

We study contest performance by focusing on the per capita payoffs of the contestants in an important class of asymmetric two-group contests. The group with the higher valuation has a greater chance of winning the contest whenever the rent-seeking technology is increasing and concave. We note that equilibrium efforts and payoffs per capita are uniquely defined and can be subjected to a comparative statics analysis. We show that payoff per capita for a group increases with its own valuation but decreases with the valuation of the opposing group. Per capita payoff for a group increases with its population.     

PUBLIC GOODS,RENT DISSIPATION,AND CANDIDATE COMPETITION*

The early literature on rent seeking presumed that total expenditures in the rent-seeking process would equal the value of a contested prize. Subsequent analysis has shown, however, that a number of circumstances give rise to underdissipation of the contested rent—imperfectly discriminating contests, risk-aversion, or where individuals' valuations of the prize are not identical. This paper shows how underdissipation is associated with the public-good character of contested rents. In particular, total rent dissipation is demonstrated to be less than the average stake of the individual contenders. In addition to assessing rent dissipation in contests for public-good allocations, the paper also endogenizes the value of the prize by placing the rent-seeking contest in a setting of candidate competition.     

The theory of contests: A unified model and review of the literature

This paper is a brief review of the literature on contests, with focus on rent-seeking. A fairly general contest model is presented. We show that the Tullock contest model and the first-prize sealed-bid auction model are obtained as special cases. Some important modifications of the basic model are reviewed: hierarchical rent-seeking, rent-seeking under risk aversion, insecure rents, sabotage in rent-seeking contests, contest design, commitment and endogenous order of moves, and dynamic rent-seeking.     

Group competition for rents

This paper examines rent dissipation in a two-stage group rent-seeking contest without a predetermined distribution rule. the rent in this setting exhibits both public and private good characteristics depending on the stage of the contest. Focusing on the relationship between group size and aggregate rent seeking we find that social waste depends not only on total numbers but also on the distribution of population across groups. We show that group size asymmetry acts to reduce rent dissipation.     

Population uncertainty in contests

Summary. We study contests where the set of players is a random variable. If it is known for certain that there will be at least one participant, then aggregate contest expenditure in equilibrium is strictly lower in a contest with population uncertainty than in a non-uncertain contest with the same expected number of players. This suggests an explanation of, for example, why empirical studies show rent-seeking expenditures to be much lower than predicted by other theories.Received: 29 June 2003, Revised: 14 December 2004, JEL Classification Numbers: C72, D44, D72, D82, K41. Correspondence to: Karl Wärneryd     

Social motives in intergroup conflict: Group identity and perceived target of threat

We experimentally test the social motives behind individual participation in intergroup conflict by manipulating the perceived target of threat—groups or individuals—and the symmetry of conflict. We find that behavior in conflict depends on whether one is harmed by actions perpetrated by the out-group, but not on one׳s own influence on the outcome of the out-group. The perceived target of threat dramatically alters decisions to participate in conflict. When people perceive their group to be under threat, they are mobilized to do what is good for the group and contribute to the conflict. On the other hand, if people perceive to be personally under threat, they are driven to do what is good for themselves and withhold their contribution. The first phenomenon is attributed to group identity, possibly combined with a concern for social welfare. The second phenomenon is attributed to a novel victim effect. Another social motive—reciprocity—is ruled out by the data.     

Evolutionary equilibrium in Tullock contests: spite and overdissipation

Tullock's analysis of rent-seeking as a contest is reconsidered from an evolutionary point of view. We show that evolutionarily stable behavior in a Tullock contest exists and differs from behavior in Nash equilibrium. Evolutionarily stable behavior in these contests is robust in a strong sense and may entail overdissipation of the contested rent.     

总经理更换、公司治理和经理人员寻租行为——来自上市公司总经理更换当年投资决策的经验证据

本文选取2003～2005年披露最终控制人的上市公司面板数据，研究不同股权性质的上市公司总经理更换当年的投资决策。研究结果显示，国有控股上市公司总经理更换当年没有明显的寻租行为，民营控股上市公司总经理更换当年存在明显的寻租行为。但是，无论是国有还是民营控股上市公司，公司治理都不能有效地抑制总经理离任前的寻租行为。     

政府创新补贴对中国工业自有研发支出的影响研究 ——基于空间计量模型

从空间关联视角再审视政府创新补贴的效应,并基于2001—2017年我国省际面板数据,运用空间面板模型分析了政府创新补贴对中国工业自有研发支出的影响。结果表明,政府创新补贴显著激励了本省市工业自有研发支出,同时,也正向影响相邻省市工业自有研发支出。在控制了内生性问题后,该结论依然成立。另外,在不同所有制和创新水平下,政府创新补贴对工业自有研发支出的空间影响效果存在差异。根据研究结论,本文提出加大政府创新补贴力度并充分考虑溢出效应、融合政府激励和市场驱动以及营造支持成功创新的环境等4项政策建议。     

The Place of Indigenous Institutions in Constitutional Order

The failure of the state in Africa and elsewhere, and its attendant conflict, is rooted in the lack of correspondence between indigenous institutions and the formal structures of the state. Indigenous institutions, as have variously evolved, represent sets of practices and expectations that can be distinctive to problems of collective action faced by groups of individuals in their own exigent circumstances. By developing a community of understanding tuned to these circumstances, they provide the rules and grammar within which individuals perceive their actions and those of others. They thus each represent a facility within which a person can use his or her knowledge of time and place and his or her understanding of others in the group in resolving collective action problems. In order to overcome the pathologies of state failure, societies should be constituted with reference to these indigenous political resources. As such, constitutional rules should both link such systems of collective action and set out the terms by which they develop.     

Political incentives for rent creation

Rent-seeking is often depicted as a contest in which rent-seekers compete for a prize—the rent. In the process of rent-seeking, much or perhaps all of the rent is dissipated through the costs the contestants incur to compete. Rent dissipation is inconsistent with the incentives of both the rent-seekers and those who create the rents. Policymakers have an incentive to create rents only if they gain from the process, and their gain comes from sharing any surplus that goes to those who obtain the rents. A surplus can be created through a barrier to entry into rent-seeking. When institutions that generate barriers to entry into rent-seeking break down, rent-seeking competitions can occur in which all rents are dissipated, but this should be a special case rather than the general rule in rent-seeking.     

Do socially motivated self‐help groups perform better? Exploring determinants of micro‐credit groups’ performance in Eastern India

Group‐based micro‐credit initiatives, as part of the broader social and solidarity‐based finance initiatives, have gained prominence over the past decade, especially in developing economies like India. Lending to the poor, especially women, through micro‐credit groups, are significantly associated with the utilization of commons. Apart from their financial operations, self‐help groups promote social empowerment activities and collective action following a dual bottom‐line approach. However, the causal role of the group's motivation towards pursuing social objectives has not been explored in the past. The present study, therefore, investigates the interlinkages between the group's intrinsic motivation and efficiency using an innovative two‐stage double bootstrapped DEA‐based methodology. Results from the study affirm that apart from traditional factors like maturity, accessibility and group management, the motivation of the group is a crucial determinant of social efficiency. Additionally, the group's loan‐to‐savings ratio and receipt of cash payments significantly affect its long‐term financial sustainability. Micro‐credit groups cannot contribute sustainably as a viable alternative to traditional means of access to credit if it merely offers innovative forms of financing and consumption. They need to be socially aligned to serve the community better and contribute to the group's overall performance and galvanize community‐based resource management.     

Simultaneous inter- and intra-group conflicts

This paper models the trade-off between production and appropriation in the presence of simultaneous inter- and intra-group conflicts. The model exhibits a ‘group cohesion effect’: if the contest between the groups becomes more decisive, the players devote fewer resources to the intra-group conflict. Moreover, there is also a ‘reversed group cohesion effect’: if the intra-group contests become less decisive, the players devote more resources to the inter-group contest. The model also sheds new light on normative questions. I derive exact conditions for when dividing individuals into more groups leads to more productive and less appropriative activities. Moreover, I show that there is an optimal size of the organization which is determined by a trade-off between increasing returns to scale in production and increasing costs of appropriative activities. I want to thank Paul Heidhues, Kai Konrad, Thomas Kittsteiner, Klaas Staal, an anonymous referee, and in particular Dan Kovenock for very helpful comments and suggestions. Any remaining errors are mine. Financial support from the Deutsche Forschungsgemeinschaft through SFB/TR 15 is gratefully acknowledged.     

Savings and default

We develop a model in which individuals compete for a fixed pool of prizes by investing effort in a contest. Individuals belong to two separate and identifiable groups. We say that the contest is discriminatory if a lower share of prizes is reserved for one group than for the other. We show that it can be difficult for an observer to detect the presence or absence of discrimination in the contest, as both regimes can be observationally equivalent. In particular, one group’s belief that it is allocated a lower share of prizes than the other group can be consistent with observed data even if no such group quotas actually exist. Conversely, the belief that the contest does not discriminate can be consistent with data when, in fact, discrimination exists. Incorrect beliefs will therefore not be revised, as the contest generates no evidence to the contrary.