Rent-Seeking Contests with Independent Private Values
Institute for Empirical Research in Economics University of Zurich Working Paper No. 490
23 Pages Posted: 20 Jun 2010
Date Written: June 17, 2010
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.
Keywords: Rent seeking, conflict, independent private valuations, first-order stochastic dominance, mean-preserving spread
JEL Classification: C72, H41
Suggested Citation: Suggested Citation
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By Ohad Kadan