Culture, Politicization and Relative Rent Dissipation

Abstract

A major concern in the contest literature has been the question how do changes in the parameters of the contest affect the lobbying efforts exerted by the contestants and, in turn, the extent of rent dissipation. This comparative statics analysis focused on such parameters as the nature of the rent, the number of contestants, the form of the contest success function, the contestants’ valuations of the prize, the contestants’ attitude toward risk (see Nitzan 1994 for a survey) and on the structure of the game (how the sharing rules of a collective rent and how the strategic contesting groups are formed, Baik, 1994, Baik and Lee, 1997, 2001, Hausken, 1995, Lee 1995, Nitzan, 1991). The nature of the government (the politicians’ or bureaucrats’ preferences) that very often accounts for the very existence of the contest was not one of the examined parameters and for a very good reason. If the prize of the contest or, more generally, if the contest prize system is exogenous, then the preferences of the government determine whether the contest exists or not and, in turn, whether some lobbying efforts are incurred, but they have no effect on their value. Specifically, if the government is sufficiently benevolent, that is, sufficiently concerned about the well being of the contestants rather than about its narrower interest, which is positively affected by the lobbying efforts directed to her, then it would not give rise to the socially disadvantageous contest.