Political culture and discrimination in contests

Gil S. Epstein, Yosef Mealem, Shmuel Nitzan

Research output: Contribution to journalArticlepeer-review

38 Scopus citations

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.

Original languageEnglish
Pages (from-to)88-93
Number of pages6
JournalJournal of Public Economics
Volume95
Issue number1-2
DOIs
StatePublished - Feb 2011

Keywords

  • All-pay-auction
  • Contests
  • Discrimination
  • Logit contest success function
  • Political culture

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