Abstract
A competitive rent-seeking club (CRSC) offers its members the chance of winning a prize (status, position, privilege) by being selected, typically, by a civil servant or a politician. The selector replaces in our setting the usual contest success function; instead of determining the winner on the basis of the club-members’ efforts, he selects the winner on the basis of quality. This article focuses on the effect of incomplete search of the selector on the efficiency of democratic self-governing and decentralized RSC’s that control admittance to the club and its transparency, assuming that quality of their members is fixed. The incomplete search of the selector is assumed to take the simple form of fixed random sampling of the contestants—the members of the CRSC. Our results imply that, even when active rent-seeking expenditures are disregarded, the decisions of CRSC’s regarding their composition and transparency tend to reduce quality and are therefore inefficient.
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We are especially indebted to Arthur Fishman, Martin Kolmar, Nava Kahana and Klaus Schmidt for their insightful comments. Shmuel Nitzan is grateful to the CES at the University of Munich, the Tinbergen Institute at the University of Amsterdam, the CODE at the Universitat Autonoma de Barcelona and the IAE in Barcelona for their hospitality which enabled the completion of this study.
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Nitzan, S., Kriesler, K. The effect of limited search ability on the quality of competitive rent-seeking clubs. Soc Choice Welf 35, 81–106 (2010). https://doi.org/10.1007/s00355-009-0431-3
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DOI: https://doi.org/10.1007/s00355-009-0431-3