Ambiguous political power and contest efforts

When there is incomplete information on the source of power in a contest, the contestants may divide their lobbying efforts between the potential centers of power, only one of which determines the contests’ winning probabilities. Our analysis focuses on the effect of ambiguity regarding the source of power on the contestants’ aggregate effort in a symmetric, simple lottery contest with two potential centers of power. Specifically, we examine the effects of varying the informativeness of the contestants’ private signals (i.e., the probability that a signal is correct) and the degree of correlation between them. Our benchmark case is the standard Tullock’s model, in which the source of power is known, i.e., the contestants’ signals are perfectly informative. We show that the level of aggregate effort in this case is reached also when the signals are perfectly uninformative. However, in any intermediate case the contestants’ aggregate effort is lower, provided that the signals are not perfectly correlated. In other words, there is a U-shape relationship between the informativeness of the signals and the aggregate effort in the contest. The lowest level of effort is spent when the signals are independent and the probability that a signal is true is about 0.85. In this case, efforts are reduced by about one-fifth in comparison with the benchmark case: from a rent dissipation of 50% to slightly over 40%.     

Efforts in two-sided contests

The degree of rent dissipation is studied in extended two-sided contests that involve two types of efforts. While usual contestants expend resources in trying to win the contested prize, potential recipients of the rent-seeking efforts also participate in the contest. This is due to uncertainty regarding the source of power in the contest that induces the bureaucrats to expend resources to increase their share in the rent-seeking efforts by trying to appear as the party controlling the allocation of the prize. We show that the existing theoretical and empirical studies are incomplete and may underestimate the extent of rent dissipation.     

Performance and prize decomposition in contests

This paper focuses on the effect of additive contest decomposition on performance: winning probabilities and efforts of the contestants. Our main result provides a sufficient condition for invariance of contest performance to the decomposition of a contest, when the sum of the possibly differently valued prizes in the segmented contests is equal to the value of the prize in the original grand contest and the relative prizes in the sub-contests are equal for every contestant. It is shown that this condition is satisfied by the commonly used exponential logistic contest success functions. With these functions the contest designer does not have an incentive to split the prize and create additive, segmented sub-contests. We then prove that when the additive contest decomposition is asymmetric, contest decomposition may adversely affect the designer; that it, reduce the total efforts of the contestants.     

A Talmudic constrained voting majority rule

Public Choice - Talmudic Law requires a minimal supermajority (13 out of 23) for conviction, but at the same time, provides that a unanimous conviction leads to a mistrial. We derive the necessary...