Political Culture and Discrimination in Contests

29 Pages Posted: 30 Aug 2010

See all articles by Gil S. Epstein

Gil S. Epstein

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics; University College London - CReAM - Centre for Research and Analysis of Migration

Ayala Mealem

affiliation not provided to SSRN

Shmuel Nitzan

Bar-Ilan University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Abstract

Many economic and political decisions are the outcome of strategic contests for a given prize. The nature of such contests can be determined by a designer who is driven by political considerations with a specific political culture. The main objective of this study is to analyze the effect of political culture and of valuation asymmetry on discrimination between the contestants. The weights assigned to the public well-being and the contestants' efforts represent the political culture while discrimination is an endogenous variable that characterizes the mechanism allocating the prize. We consider situations under which the optimal bias of the designer is in favor of the contestant with the larger or smaller prize valuation and examine the effect of changes in the political culture and in valuation asymmetry on the designer's preferred discrimination between the contestants. Focusing on the two most widely studied types of contest success functions (deterministic all-pay-auctions and logit CSFs), we show that an all-pay auction is always the preferred CSF from the point of view of the contest designer. This result provides a new political-economic micro foundation to some of the most commonly used models in the contest literature.

Keywords: political culture, discrimination, contests, logit contest success function, all-pay-auction

JEL Classification: H0

Suggested Citation

Epstein, Gil S. and Mealem, Ayala and Nitzan, Shmuel, Political Culture and Discrimination in Contests. IZA Discussion Paper No. 5158. Available at SSRN: https://ssrn.com/abstract=1667802

Gil S. Epstein (Contact Author)

Bar-Ilan University - Department of Economics ( email )

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HOME PAGE: http://faculty.biu.ac.il/~epsteig/

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Ayala Mealem

affiliation not provided to SSRN

Shmuel Nitzan

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972.3.531.8930 (Phone)
+972.3.535.3180 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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