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Economic Theory

, Volume 53, Issue 1, pp 239–268 | Cite as

Incomplete information in rent-seeking contests

  • Cédric Wasser
Research Article

Abstract

We consider a variant of the Tullock lottery contest. Each player’s constant marginal cost of effort is drawn from a potentially different continuous distribution. In order to study the impact of incomplete information, we compare three informational settings to each other; players are either completely informed, privately informed about their own costs, or ignorant of all cost realizations. For the first and the third setting, we determine the unique pure-strategy Nash equilibrium. Under private information, we prove existence of a pure-strategy Bayesian Nash equilibrium and identify a sufficient condition for uniqueness. Assuming that unit cost distributions all have the same mean, we show that under ignorance of all cost realizations ex ante expected aggregate effort is lower than under both private and complete information. Ex ante expected rent dissipation, however, is higher than in the latter settings if we focus on the standard lottery contest and assume costs are all drawn from the same distribution. Between complete and private information, there is neither a general ranking in terms of effort nor in terms of rent dissipation.

Keywords

Rent-seeking Contest Incomplete information Private values 

JEL Classification

D72 D74 D82 C72 

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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.Institute of Economic Theory IHumboldt University of BerlinBerlinGermany

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