Rent-seeking incentives in share contests

Dickson, Alex and MacKenzie, Ian A. and Sekeris, Petros G. (2018) Rent-seeking incentives in share contests. Journal of Public Economics, 166. pp. 53-62. ISSN 0047-2727 (https://doi.org/10.1016/j.jpubeco.2018.08.004)

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Abstract

This article investigates share contests. In our framework we allow contestants to have more general preferences than have been used in the literature. Previous approaches have the unfortunate characteristic that contestants' marginal rates of substitution between the rent share allocated by the contest and their effort is constant regardless of the size of the rent share. This results in a conventional wisdom: larger rents command more effort. By providing a more general framework, we show the reverse may also be true and we derive the conditions under which this is the case. Our approach then allows us to rationalize, within a standard contest framework, observations that rents might be more hotly contested when they become scarcer, as has evidently been the case with the recent global contraction of public funds available for public policy.

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