Stakes and welfare in rent-seeking contests

Using a public-policy application of Tullock's two-player rent-seeking contest, this paper focuses on the relationship between the aggregate expected utility of the players and their asymmetric valuations. In our game these valuations are the players' payoffs in the two possible states of nature, namely, the approval and rejection of the proposed public policy. Our main result provides the condition that ensures that the aggregate expected payoff of the two contestants (the interest groups that compete on the approval of the proposed policy) is positively related to the valuation parameters.