bid caps in large contests abstract we study the effect of rigid and flexible bid caps on contestants aggregate costs and aggregate bids in all pay contests with a large number of heterogeneous contestants and prizes we show that rigid caps always decrease aggregate costs whereas flexible caps have essentially no effect on aggregate costs rigid caps decrease aggregate bids when costs are linear or concave but increase aggregate bids under some conditions when costs are convex flexible caps always decrease aggregate bids

rent seeking and rent dissipation a neutrality result abstract we consider rent seeking contests between at least two agents who might value the prize differently we capture a wide range of institutional aspects of contests by analyzing a class of contest success functions fulfilling several properties the main properties are anonymity and a condition on the elasticity of a rent seeker s win probability with respect to her effort we show the existence of a mixed strategy equilibrium and establish equilibrium payoffs in this equilibrium complete rent dissipation holds our results imply a partial robustness result for the all pay auction

contests with multiple rounds this paper studies contests where players have the flexibility to add to their previous efforts after observing their rivals most recent effort in an intermediate stage it is found that 1 contrary to previous findings the stackelberg outcome where the underdog leads and the favorite follows cannot be an equilibrium 2 there are multiple subgame perfect equilibria all occurring on the underdog s usual one shot reaction function in between and including the one shot cournot nash and stackelberg outcome with the favorite leading 3 the total equilibrium effort is typically greater than or equal to what a one shot cournot nash play would predict and 4 in settings where players can choose whether or not to disclose their early actions to the rival both the favorite and the underdog disclose in equilibrium applications in sports lobbying and r d races are discussed

caps on political lobbying comment following the 1999 israeli elections the winning candidate s ehud barak s party was fined 3 2 million dollars for violating israel s campaign financing laws by exceeding the spending cap imposed and raising 1 2 million dollars illegally see time europe 2000 while adhering to the strict ncaa recruiting regulations the university of oregon spent 3 million dollars to make their football locker room the best anywhere including the nfl lexington herald leader 2003 when asked about the previous salary cap in the uk football league players said that it the cap was so artificial that clubs paid money in brown paper envelopes bbc2 newsnight 2002 in all these cases there officially existed a rigid spending cap however they show that even though a cap exists the cap might not be easily enforced when enforced the penalty may just be financial rather than a change in outcome the cap may be enforced and adhered to but there may also be alternate perhaps less effective hence more costly means of spending we also see that the flexible nature of the cap is often built into the rules by examining the salary caps of the four major us sports leagues where the caps are routinely exceeded in baseball and basketball surpassing the cap invokes a pure financial penalty called a luxury tax which is proportional to the excess in football while the cap is stated in terms of salaries many teams use signing bonuses as a way to circumvent it in ice hockey there is a dual cap system where the luxury tax is invoked on salaries falling between the two caps and signing bonuses are an allowed method to exceed the

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

heterogeneous risk loss aversion in complete information all pay auctions we extend previous theoretical work on n player complete information all pay auctions to incorporate heterogeneous risk and loss averse utility functions we provide sufficient and necessary conditions for the existence of equilibria with a given set of active players with any strictly increasing utility functions and characterize the players equilibrium mixed strategies assuming that players can be ordered by their risk aversion player a is more risk averse than player b if whenever player b prefers a certain payment over a given lottery so does player a we find that in equilibrium the more risk averse players either bid higher than the less risk averse players and win with higher ex ante probability or they drop out furthermore while each player s expected bid decreases with the other players risk aversion her expected bid increases with her own risk aversion thus increasing a player s risk aversion creates two opposing effects on total expected bid a sufficient condition for the total expected bid to decrease with a player s risk aversion is that this player is relatively more risk averse compared to the rest of the players our findings have important implications for the literature on gender differences in competitiveness and for gender diversity in firms that use personnel contests for promotions

a restriction on lobbyist donations abstract this paper studies the consequences of a fine for violating a ceiling on permissible donations in a competition for a political prize increasing the fine can increase or decrease the amount of expected donations in equilibrium

caps on political lobbying reply yeon koo che and ian l gale 1998 cg hereafter studied the impact of imposing a cap on lobbying expenditures they showed that a cap may lead to a greater expected aggregate expenditure and b a less efficient allocation of a political prize in their comment todd kaplan and david wettstein 2006 kw hereafter show that if the cap is not rigid i e its impact on the cost of lobbying is continuous it has no effect kw employ the same basic framework as cg except for the assumption that a bid of x costs a lobbyist c x for a strictly increasing continuous function c imposition of a cap raises costs to the strictly increasing continuous function c to see why the cap has no effect on lobbying expenditures in that setting think of a lobbyist choosing a cost c 0 rather than a bid the lobbyist who chooses the higher cost necessarily makes the higher bid because the lobbyists have the same strictly increasing cost function the functional relationship between bids and costs does not matter so the cap has no effect we explore the reasons for the different results and we show that cg s results can still hold in a more general environment two components underlie cg s analysis a a cap will constrain the stronger lobbyist thereby leveling the playing field and b this will intensify competition raising the expected aggregate expenditure in the case of kw s nonrigid cap the first effect does not arise since the stronger lobbyist can always outspend the weaker one this does not vitiate the second component however as will be seen when the cap has an equalizing effect it will intensify competition with the predicted effect on expenditures below we characterize the precise nature of an equalizing shift in costs more important we will describe plausible circumstances under which a nonrigid cap can generate an equalizing shift when lobbyists differ in their costs of lobbying for instance one lobbyist could be a more effective fundraiser than the other in such a case a cap on lobbying reduces the competitive gap between the lobbyists and it may cause the expected aggregate expenditure and the probability of misallocation to rise just as in cg

caps on bidding in all pay auctions comments on the experiments of a rapoport and w amaldoss abstract in an article published in this journal rapoport and amaldoss rapoport a amaldoss w 2000 mixed strategies and iterative elimination of strongly dominated strategies an experimental investigation of states of knowledge journal of economic behavior and organization 42 483 521 analyze symmetric and asymmetric investment games similar to two player all pay auctions with bid caps in this note we correct an error in their characterization of the set of nash equilibria of their symmetric investment game we discuss the implications for the analysis of data from rapoport and amaldoss s experiments

contests with small noise and the robustness of the all pay auction this paper considers all pay contests in which the relationship between bids and allocations reflects a small amount of noise prior work had focused on one particular equilibrium however there may be other equilibria to address this issue we introduce a new and intuitive measure for the proximity to the all pay auction this allows in particular to provide simple conditions under which actually any equilibrium of the contest is both payoff equivalent and revenue equivalent to the unique equilibrium of the corresponding all pay auction the results are shown to have powerful implications for monopoly licensing political lobbying electoral competition optimally biased contests the empirical analysis of rent seeking and dynamic contests

asymmetric contests with conditional investments rent seeking scenarios competitions for promotions and research and development r d races are examples of competitions in which participants expend resources regardless of whether they win or lose although similar in their all pay feature such competitions often differ in important dimensions these include the type of technologies employed in competition the type of asymmetries among competitors the degree to which expenditures are sunk and the number of prizes consider lobbying settings in which firms expend resources in order to influence a policymaker if expenditures take the form of monetary outlays and all firms have the same cost of capital then it is reasonable to think of firms marginal cost of influence as linear but if a firm has a reputational advantage and high costs of capital its lobbying technology may be more reasonably thought of as having convex costs relatively low marginal costs up to a moderate level of influence due to the reputational advantage and relatively high marginal costs at higher levels of influence due to the high costs of capital similarly the lobbying technology of a firm that is relatively unknown and has low costs of capital may be characterized by concave costs lobbying restrictions geographic location or preferential treatment by the policymaker further impact firms lobbying technologies inducing additional nonlinearities and asymmetries among firms in some lobbying settings firms also commit to expenditures conditional on a favorable outcome for example a firm may commit to building factories and creating new jobs if it is granted one of a limited number of manufacturing licenses thus the specification of firms lobbying technologies the type of asymmetries among firms the combination of unconditional and conditional investments and the number of eventual winners may change according to the lobbying setting studied the same is true for other competitions with an all pay feature in a competition for promotions workers often differ in their abilities experience and social skills more than one prize

endogenous timing in contests with delegation i introduction contests with delegation where each player hires a delegate to expend effort or resources on the player s behalf to win a prize are common 1 an example is litigation between a plaintiff and a defendant in which each litigant hires an attorney who expends his effort to win the lawsuit on behalf of his client another example is a rent seeking contest in which each firm hires a lobbyist who expends his effort to acquire a monopoly or a procurement contract from the government on behalf of his client yet another example is a patent contest in which each firm hires a group of independent researchers or university professors who conduct research to obtain a patent on behalf of their employer delegation is attractive to players because they each can use superior ability by hiring a delegate with more ability than herself and achieve strategic commitments through delegation in such contests with delegation we believe delegates decide endogenously when to expend their effort after signing delegation contracts indeed pursuing their self interest the delegates may well endogenize the order of their moves and communicate it with each other before they expend their effort we believe also that players take it into account when designing their contracts for the delegates that the delegates will endogenize the order of their moves it is these ideas that motivate this paper accordingly the purpose of this paper is to systematically study contests with delegation in which delegates decide endogenously when to expend their effort after signing delegation contracts and before they expend their effort we study two player contests with delegation focusing on not only the equilibrium delegation contracts between players and their delegates but also the equilibrium orders of the delegates moves specifically we set up and analyze the following three stage game in the first stage two players each hire a delegate and they simultaneously announce their contracts written with their delegates each player s contract specifies how much her delegate will be paid if he wins the contest and how much if he loses it in the second stage each delegate decides when to expend his effort and the delegates announce their decisions simultaneously in the third stage the delegates expend their effort according to their decisions in the second stage to win the prize on behalf of their employers we show that in equilibrium the delegate hired by the higher valuation player chooses his effort level after observing his counterpart s and his expected payoff is greater than that of his counterpart this advantage of the delegate of the higher valuation player can be explained by the fact that his employer the higher valuation player offers better contingent compensation as it will be defined in section ii to him than the lower valuation player does to her delegate we compare the outcomes of the endogenous timing framework the three stage game presented above with those of the simultaneous move framework the game which is the same as the three stage game with the exception that the delegates choose their effort levels simultaneously and this order of their moves is given exogenously an interesting result is that each player offers her delegate a better contract in the endogenous timing framework than in the simultaneous move framework another interesting result is that unless the valuation for the prize of the higher valuation player is significantly greater than that of the lower valuation player then each delegate s expected payoff is greater in the endogenous timing framework than in the simultaneous move framework whereas each player s expected payoff is less in the endogenous timing framework than in the simultaneous move framework in summary pursuing their self interest the delegates decide endogenously when to expend their effort given contracts between the players and the delegates

bid costs and endogenous bid caps we study contests where several privately informed agents bid for a price all bidders bear a cost of bidding that is an increasing function of their bids and moreover bids may be capped we show that regardless of the number of bidders if agents have linear or concave cost functions then setting a bid cap is not profitable for a designer who wishes to maximize the average bid on the other hand if agents have convex cost functions i e an increasing marginal cost then affectively capping the bids is profitable for a designer facing a sufficiently large number of bidders

some talk money in politics a partial review of the literature the financing of political campaigns is an area of active scholarly study i review some of the recent literature and discuss important methodological issues that arise in empir ical research on campaign expenditures and campaign contributions the effects of campaign expenditures and advertising on candidate and ballot measure elections are summarized as are the impacts of contributions on contributors welfare many states have changed their campaign finance laws in the past few years and i describe work that exploits variations in these laws a discussion of the strategies used by interest groups to allocate their campaign contributions provides insights into contributors motives

two player asymmetric contests with ratio form contest success functions i examine players equilibrium effort levels in two player asymmetric contests with ratio form contest success functions i first characterize the nash equilibrium of the simultaneous move game i show that the equilibrium effort ratio is equal to the valuation ratio and that the prize dissipation ratios for the players are the same i also show that the prize dissipation ratio for each player is less than or equal to the minimum of the players probabilities of winning at the nash equilibrium and thus never exceeds a half then i examine how the equilibrium effort ratio the prize dissipation ratios and the players equilibrium effort levels respond when the players valuations for the prize or their abilities change jel d72 c72 i introduction a contest is a situation in which players compete with one another by expending irreversible effort to win a prize typical examples are various types of rent seeking contests competition among firms to win a monopoly rent secured under government protection or by a government procurement contract competition between domestic and foreign firms to obtain governmental trade policies favorable to them competition among firms to acquire a rent generated by rights of ownership to an import quota and competition among firms to capture rents created by governmental decisions to establish tariffs or other trade barriers other examples of contests include auctions patent races research and development r d competition among firms litigation competition for jobs among job candidates competition among candidates to win promotion to higher ranks election campaigns between political candidates and competition between local governments to invite business firms government institutions or government owned corporations into their districts naturally due to their prevalence and importance in economies such contests have been studied by many economists loury 1979 lee and wilde 1980 tullock 1980 rogerson 1982 rosen 1986 appelbaum and katz 1987 dixit 1987 hillman and riley 1989 hirshleifer 1989 ellingsen 1991 nitzan 1991 1994 krishna and morgan 1997 che and gale 1998 hurley and shogren 1998 and konrad 2000 to name a few in this vast literature on the theory of contests one of the main issues is how much effort do the players exert in pursuit of the prize indeed it is of great interest because the players effort levels determine the profitability of the players engaging in the contest and in some cases they are revenues collected by the contest organizer or bribes given to government officials furthermore they account for other important outcomes of the contest for example in a rent seeking contest efforts expended by the players are viewed as social costs due to rent seeking activities so that total effort level is a measure of economic efficiency in an r d contest effort levels expended by the players these are r d expenditures of the firms determine the expected date of invention this article also addresses the issue how much effort do the players exert in pursuit of the prize but it differs from previous research by dealing with contests with ratio form contest success functions 1 specifically the novelty of this article is to consider two player asymmetric contests in which each player s probability of winning is a function of the ratio of the two players effort levels two player contests with ratio form contest success functions or two player contests that can be best modeled with ratio form contest success functions are easily observed in the real world examples include various types of two player rent seeking contests litigation between a plaintiff and a defendant election campaigns between two parties or candidates and r d competition between two firms consider for example a rent seeking contest in which two firms potential monopolists compete with each other to win a government monopoly franchise contract

on the continuous equilibria of affiliated value all pay auctions with private budget constraints abstract we consider all pay auctions in the presence of interdependent affiliated valuations and private budget constraints for the sealed bid all pay auction we characterize a symmetric equilibrium in continuous strategies for the case of n bidders budget constraints encourage more aggressive bidding among participants with large endowments and intermediate valuations we extend our results to the war of attrition where we show that budget constraints lead to a uniform amplification of equilibrium bids among bidders with sufficient endowments an example shows that with both interdependent valuations and private budget constraints a revenue ranking between the two auction formats is generally not possible equilibria with discontinuous bidding strategies are discussed

primaries and the new hampshire effect candidates for u s presidential elections are determined through sequential elections in single states the primaries we develop a model in which candidates can influence their winning probability in electoral districts by spending money on campaigning the equilibrium replicates several stylized facts very well campaigning is very intensive in the first district the outcome of the first election then creates an asymmetry in the candidates incentives to campaign in the next district which endogenously increases the equilibrium probability that the first winner wins in further districts on the normative side our model oers a possible explanation for the sequential organization it leads in expectation to a lower level of advertising expenditures than simultaneous elections moreover if one of the candidates is the more eective campaigner sequential elections also perform better with regard to the selection of the best candidate

credit auctions and bid caps abstract in this paper we offer two contributions to the field of credit auctions first we compare first and second price credit auctions and provide solvency dependent conditions such that one mechanism dominates the other in terms of expected payoffs of all the parties involved in addition we present a new possibility of using bid caps in credit auctions we study the equilibria in the capped mechanisms and show that bid caps can increase the seller s expected payoff and in some cases the expected payoffs of all sides a win win situation

sequential location games we study location games where market entry is costly and occurs sequentially and where consumers are nonuniformly distributed over the unit interval we show that for certain classes of densities including monotone and under some additional restrictions hump shaped and u shaped ones equilibrium locations can be determined independently of when they are occupied our analysis reveals a number of peculiarities of the uniform distribution extensions of the model allow for price competition and advertisement in media markets winner take all competition trade offs between profits in the short and the long run and firms operating multiple outlets

distributional conflict in organizations abstract hierarchy can function as an instrument to channel influence activities or power struggles in organizations contrary to what has frequently been argued we show that multi divisional organizations may involve lower influence costs than single tier organizations even though they offer more scope for organizational conflict and have more executives that can be influenced these benefits derive from two effects first part of the conflict in multi divisional organizations takes place on the division level where a small number of agents fight over only a fraction of the overall prize second by grouping agents into common divisions multi divisional organizations create free rider problems in rent seeking our model sheds new light on the desirability of divestitures and the transition from the u to the m form by us corporations in the 1920s

contest functions theoretical foundations and issues in estimation contest functions alternatively contest success functions determine probabilities of winning and losing as a function of contestants e ort they are used widely in many areas of economics that employ contest games from tournaments and rent seeking to conflict and sports we first examine the theoretical foundations of contest functions and classify them into four types of derivation stochastic axiomatic optimally derived and microfounded the additive form which includes the ratio or tullock functional form can be derived in all four di erent ways we also explore issues in the econometric estimation of contest functions including concerns with data endogeneity and model comparison

incentivizing r d prize or subsidies abstract this paper studies the optimal design of r d contests a sponsor e g the us department of defense or the world health organization wants to improve the quality of the winning products to do so it partitions its budget between two schemes an inducement prize and efficiency enhancing subsidies to the firms competing in the contest prizes and subsidies have different functions and they provide complementary incentives in the optimally designed contest subsidies increase while the prize decreases if the innovation process is more challenging further sensible conditions are identified under which the optimal contest implements either a handicapping scheme by preferentially subsidizing the underdog or a national champion scheme by favoring the favorite our analysis yields a number of useful implications and sheds light on an array of r d incentive schemes such as the dod s design competitions and vaccine development incentives

influencing rent seeking contests this paper shows that a policy that uniformly increases contestants effort costs can lead to an increase in total effort in asymmetric settings this levels the playing field and therefore encourages weaker players who otherwise would have stayed out to enter paradoxically a contest designer whose only objective is to maximize total effort may thus wish to make rent seeking more difficult these results suggest that the often lamented bureaucratic red tape might in fact be a rational response to the problem of attracting lobbyists to participate in a contest

a complete information partnership contest with negative productivity spillovers abstract this note examines a complete information contest with non linear rank order effects the players payoffs incorporate a multiplicative term that allows for negative productivity spillovers under certain conditions our game has a symmetric mixed strategy equilibrium to characterize this equilibrium we adapt a method originally developed for linear settings we obtain closed form solutions for the mixing distribution as well as for the expected efforts and payoffs the note also explores the implications of negative productivity spillovers for optimal contest design we show that a planner who seeks to maximize the participants expected payoffs may choose interior values for her instruments we derive simple expressions for these values

favoritism in asymmetric contests head starts and handicaps abstract i examine a contest with identity dependent rules in which contestants are privately informed and ex ante heterogeneous a contestant may suffer from a handicap or benefit from a head start the former reduces the contestant s score by a fixed percentage the latter is an additive bonus although total effort increases if the weak contestant is favored with a head start the optimal use of handicaps is not as clear cut depending on the nature of the asymmetry it may or may not be optimal to handicap the strong contestant moreover it is generally optimal to combine the two instruments for instance when contestants are sufficiently heterogeneous the weak contestant should be given both a head start and a handicap it may also be possible to induce higher effort and at the same time make both contestants better off ex ante

policy influence and private returns from lobbying in the energy sector in this article i quantify the extent to which lobbying expenditures by firms affect policy enactment to achieve this end i construct a novel dataset containing all federal energy legislation and lobbying activities by the energy sector during the 110th congress i then develop and estimate a game theoretic model where heterogeneous players choose lobbying expenditures to affect the probability that a policy is enacted i find that the effect of lobbying expenditures on a policy s equilibrium enactment probability to be statistically significant but very small nonetheless the average returns from lobbying expenditures are estimated to be over 130

political culture and discrimination in contests 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

policy watch congressional campaign finance reform while campaign finance reform attracts a lot of attention it seems unlikely that such reform at least in it current guise will have a large impact on the functioning of the american political system recent studies have called into question the conventional wisdom that challenger campaign spending is especially effective suggesting that attempts to close the gap between incumbent and challenger spending will have a smaller than expected impact on election outcomes while it is safe to conclude that pacs wield some influence it is not clear that limiting cash contributions will have a substantial effect

incumbency advantage and political campaign spending limits abstract this paper presents a model which captures the three main arguments for and against campaign spending limits campaign spending limits are purported to restrict the incumbent s ability to exploit his fundraising advantage in contrast to conventional wisdom a ceiling increases the incumbent s probability of victory regardless of the candidates relative fundraising abilities as long as the challenger is not more effective in campaign spending if the challenger is more effective in campaign spending ceilings have a non monotonic effect when the incumbent enjoys a mild initial voter disposition advantage a moderate ceiling decreases the incumbent s probability of victory but further restricting the limit favors the incumbent irrespective of incumbency status the marginal benefit to quality decreases with a more restrictive cap in an open seat contest a more restrictive limit improves the electoral prospects of the superior quality candidate stricter ceilings may lead to the unintended consequence of increased expected spending

contests with multi tasking the standard contest model in which participants compete in a single dimension is well understood and documented multi dimension extensions are possible but are liable to increase the complexity of the contest structure mitigating one of its main advantages simplicity in this paper we propose an extension in which competition ensues in several dimensions and a competitor that wins a certain number of these is awarded a prize the amount of information needed to run the contest is hence limited to the number of dimensions won by each player we look at the design of this contest from the point of view of maximising effort in the contest per dimension and totally and show that there will be a tendency to run small contests with few dimensions the standard tullock model and its results are encompassed by our framework

political contribution caps and lobby formation theory and evidence abstract the perceived importance of special interest group money in election campaigns motivates widespread use of caps on allowable contributions we present a bargaining model in which the effect of a cap that is not too stringent on the amount a lobby can contribute improves its bargaining position relative to the politician it thus increases the payoff from lobbying which will therefore increase the equilibrium number of lobbies when lobby formation is endogenous caps may then also increase aggregate contributions from lobbies and increase politically motivated government spending we present empirical evidence from u s states that support various predictions of the model we find a positive effect on the number of pacs formed from enacting laws constraining pac contributions moreover the estimated effect is non linear as predicted by the theoretical model very stringent caps reduce the number of pacs but as the cap increases above a threshold level the effect becomes positive contribution caps in the majority of u s states are above this threshold

tie breaks and bid caps in all pay auctions we revisit the complete information all pay auction with bid caps introduced by che and gale 1998 dropping their assumption that tie breaking must be symmetric any choice of tie breaking rule leads to a dierent set of nash equilibria compared to the optimal bid cap of che and gale we obtain that in order to maximize the sum of bids the designer prefers to set a less restrictive bid cap combined with a tie breaking rule which slightly favors the weaker bidder moreover the designer is better o breaking ties deterministically in favor of the weak bidder than symmetrically except when bidding costs are strongly convex jel classication d72 d44

the power of money wealth effects in contests abstract the relationship between wealth and power has long been debated nevertheless this relationship has been rarely studied in a strategic game in this paper we study wealth effects in a strategic contest game two opposing effects arise wealth reduces the marginal cost of effort but it also reduces the marginal benefit of winning the contest we consider three types of contests which vary depending on whether rents and efforts are commensurable with wealth our theoretical analysis shows that the effects of wealth are strongly contest dependent it thus does not support general claims that the rich lobby more or that low economic growth and wealth inequality spur conflicts

symmetric two stage contests with budget constraints the impact of a budget constraint on individual expenditures is examined in two models of two stage contests with homogenous and risk neutral players competing to win a single indivisible commonly valued rent the set of players is partitioned into equally sized groups in the first model one contestant from each group survives to compete on the second stage against the other survivors in the second model one group survives the first stage and its members compete against each other on the second stage we derive and discuss the symmetric subgame perfect equilibrium solution for each model

participation in deterministic contests abstract this paper considers participation in deterministic contests for m 1 identical prizes which employ an auction like rule to determine the winners in most papers that investigate such models participation by precisely m 1 players is associated with players having complete information about their opponents characteristics and participation by more than m 1 players is associated with players having incomplete information about their opponents characteristics i show that incomplete information is in fact neither sufficient nor necessary for participation by more than m 1 players

the all pay auction when a committee awards the prize there is very little work on the equilibrium of the all payauction when the prize is awarded by two or more people iconsider an all pay auction under committee administrationwith caps on the bids of the contestants i show that for anynumber of committee members and contestants there exists apure strategy equilibrium in which the contestants bid anamount equal to a suitably chosen cap i argue that the cap isnot an artificial restriction on the game given that thereare caps on political lobbying in the real world i find thatcommittee administration could result in higher aggregateexpenditures even if there is some probability that thecommittee will not award the prize the intuition for thisresult is that the inclusion of additional administratorsrelaxes the effect of caps on lobbying that is caps onlobbying tend to be more effective the smaller is the size ofthe committee caps may also be a solution to the problem ofmajoritarian cycles in all pay auctions under committeeadministration

rent seeking with regretful agents theory and experiment abstract we investigate both theoretically and experimentally the role that information disclosure has on behavior in all pay environments in which all agents must exert costly effort but only the winner is rewarded through the lens of all pay auctions we show that bidders who have regret concerns when they lose an auction may alter their bids whether or not information about the winning bid is disclosed all losing bidders regret not bidding 0 however when feedback on the winning bid is provided those bidders who lost at an affordable price may regret not bidding more we show that the former effect causes bidders to lower their bids while the latter effect causes bidders to raise their bids our experimental results indicate overbidding whether or not the winning bid is disclosed to losing bidders however disclosing the winning bid leads to even more aggressive bidding increases revenues decreases the frequency of dropouts and also leads to more efficient allocations thus our results show that information disclosure is a powerful tool that mechanism designers may wish to exploit to extract more rents in all pay environments

when costly voting is beneficial abstract we present a costly voting model in which each voter has a private valuation for their preferred outcome of a vote when there is a zero cost to voting all voters vote and hence all values are counted equally regardless of how high they may be by having a cost to voting only those with high enough values would choose to incur this cost we show that by adding this cost welfare may be enhanced even when the cost of voting is wasteful such an effect occurs when there is both a large enough density of voters with low values and the expected value of voters is high enough

campaign contributions and access an important and pervasive view of campaign contributions is that they are given to promote access to successful candidates under circumstances when such access would not ordinarily be given in this story access is valuable as it offers groups the opportunity to influence legislative decisions through the provision of policy relevant information under complete information regarding donors policy preferences i argue that this model predicts a negative relationship between contributions and the extent to which the groups and the recipient legislators preferences are similar however one of the more robust empirical findings in the literature is that this relationship is positive relaxing the informational assumption on donors preferences i reexamine the access story with a model in which campaign contributions can act as signals of policy preference and the informational value of access to any agent is endogenous

altruistic voting and campaign contributions abstract an altruistic citizen votes yes in a referendum if the perceived benifit of the project exceeds its perceived cost the altruist gets information about benifits and costs from contributions to the pro and con campaigns in the nash equilibrium of a campaign contribution game with two beneficiaries altruists vote on the side with the largest contribution and altruistic voting guarantees efficient choices if there are many agents however altruistic voters do not always make efficient choices a disclosure law that provides information about the number of beneficiaries increases the efficiency of the referendum process

carrots and sticks prizes and punishments in contests i introduction contests are widely used to model political lobbying sports competitions job promotions and r d races in most cases the contest s organizer has some control over the structure of rewards and punishments teachers determine who passes and who fails the exam a company sets rules about promotions and layoffs and sport governing bodies choose the number of teams advancing to a higher league and the number of those relegated to a lower one in this paper we characterize the optimal prize structure in a contest where the designer can use both rewards carrots and punishments sticks in order to motivate participants to exert effort 1 although both rewards and punishments are part of many existing incentive contracts the literature on contests focused on the incentive role of rewards because a contest that uses some punishments can be replicated by one that uses only rewards and yields the same incentives but this equivalence breaks down if the contest designer faces a budget constraint and if both rewards and punishments are costly the main focus of the present paper is to study contest design when the designer is budget constrained and it is costly to punish or reward players costly punishments appear in many situations for example in labor tournaments a firm usually incurs costs when firing workers who perform poorly e g worker compensation production disruption loss of clients and usually face search and replacement costs e g think about a faculty denying tenure to some candidates in other instances punishments are less costly to implement e g relegation in sport tournaments and we also briefly deal with this set up we assume here that the designer has a limited budget which means that costly punishments cannot be arbitrarily high subject to her budget constraint the designer determines the number and size of prizes punishments in order to maximize the participants expected total effort in particular some prizes can be positive rewards or negative punishments given the prize structure players choose their effort levels in order to maximize their expected payoff it is important to note that in a contest with n participants the marginal effect of each of n prizes on the participants total effort is different and can be either positive or negative if the marginal effect of the k th prize is positive its value given a budget constraint should be positive reward or zero and if the marginal effect is negative its value should be negative punishment or zero thus given that the contest designer has a limited budget he will prefer to distribute the entire prize sum to the prize with the highest marginal effect on the participants total effort relative to its cost in this paper we show that the relative effectiveness of punishments compared to rewards crucially depends on the curvature of the distribution of player abilities exploiting results about normalized spacings among order statistics developed by barlow and prochan 1966 we first revisit one of the main results in moldovanu and sela 2001 if punishment is not feasible the optimal prize structure offers a single reward to the top performer if rewards are not feasible we then show that the designer should only punish the player with the lowest performance if the distribution of abilities has an increasing hazard or failure rate if this last condition is not satisfied more punishments may be optimal if the designer can punish as well as reward the optimal prize structure will depend on the relative marginal cost of punishments and on the distribution of the players abilities for example if the marginal cost of punishments is the same as the marginal cost of rewards it is optimal to punish the worst performing player if the distribution of abilities is convex if that player is punished even high types will work hard to avoid performing worst because they know that there is a relatively high probability that competitors also have high types

competitive burnout theory and experimental evidence abstract we examine equilibrium selection in a two stage sequential elimination contest in which contestants compete for a single prize this game has a continuum of equilibria only one of which satisfies the coalition proof nash equilibrium cpne refinement that equilibrium involves burning out by using all of one s resources in the first stage it is pareto dominated by many other equilibria we find that cpne predicts well when four people compete but not when eight people compete for two second stage spots using a cognitive hierarchy ch framework we show that when the number of players and the mean number of thinking steps are large the ch prediction involves burning out this provides a partial explanation of our results we also develop a formal argument as to why cpne logic is more compelling with more players we conclude that more competition leads to higher bids and that burning out is indeed a competitive phenomenon

round robin tournaments with a dominant player we analyze the subgame perfect equilibrium of the round robin tournament with one strong dominant and two weak players and we compare this tournament and the one stage contest with respect to the players expected payoffs expected total effort and their probabilities of winning we find that if the contest designer s goal is to maximize the players expected total effort then if the asymmetry between the players is relatively low the one stage contest should be used however if the asymmetry is relatively high then the round robin tournament should be used

when less is more rationing and rent dissipation in stochastic contests this paper shows how to maximize revenue when a contest is noisy we consider a case where two or more contestants bid for a prize in a stochastic contest where all bidders value the prize equally we show that whenever a tullock contest yields under dissipation the auctioneer s revenue can be increased by optimally fixing the number of tickets in particular in a stochastic contest with proportional probabilities it is possible to obtain almost full rent dissipation we test this hypothesis with a laboratory experiment the results indicate that as predicted revenue is significantly higher in a lottery with rationing than in a standard lottery on the other hand an alternative rationing mechanism that does not limit total expenditures fails to increase revenue relative to a standard lottery

all pay auctions with a buy price option all pay auctions this paper studies all pay auctions in which there is a buy price option for bidders to guarantee purchases at a seller specified price we analyze symmetric increasing bidding equilibria in the first and second price all pay auctions with the buy price option while the optimal buy price in the second price is higher than are those in the first price all pay auction both formats maintain the same expected profit with an endogenous entry process all pay auctions with the buy price can attract more consumers and ultimately reach a higher expected profit than does the uniform posted price selling mechanism jel d44 l11 l81

the incentive effects of affirmative action in a real effort tournament abstract affirmative action policies bias tournament rules in order to provide equal opportunities to a group of competitors who have a disadvantage they cannot be held responsible for its implementation affects the underlying incentive structure which might induce lower performance by participants and additionally result in a selected pool of tournament winners that is less efficient in this paper we study the empirical validity of such concerns in a case where the disadvantage affects capacities to compete we conducted real effort tournaments between pairs of children from two similar schools who systematically differed in how much training they received ex ante on the task at hand contrary to the expressed concerns our results show that the implementation of affirmative action did not result in a significant performance loss for either advantaged or disadvantaged subjects instead it rather enhanced the performance for a large group of participants moreover affirmative action resulted in a more equitable tournament winner pool where half of the selected tournament winners came from the originally disadvantaged group hence the negative selection effects due to the biased tournament rules were at least partially offset by performance enhancing incentive effects

equilibrium contingent compensation in contests with delegation we consider two player contests in which each player hires a delegate who expends his effort to win a prize on the player s behalf endogenizing delegation contracts we focus on the equilibrium contracts between the players and their delegates we first show that each player s equilibrium contract is a no win no pay contract then we examine the delegates equilibrium compensation spreads effort levels probabilities of winning expected payoffs and the players equilibrium expected payoffs we show that economic rents for the delegates may exist

multi stage sequential all pay auctions abstract we study multi stage sequential all pay contests auctions where heterogeneous contestants are privately informed about a parameter ability that affects their cost of effort we characterize the perfect bayesian equilibrium of these contests and analyze the effect of the number of contestants and their types on the contestants expected highest effort

all pay contests this paper studies a class of games all pay contests which capture general asymmetries and sunk investments inherent in scenarios such as lobbying competition for market power labor market tournaments and r d races players compete for one of several identical prizes by choosing a score conditional on winning or losing it is weakly better to do so with a lower score this formulation allows for differing production technologies costs of capital prior investments attitudes toward risk and conditional and unconditional investments among others i provide a closed form formula for players equilibrium payoffs and analyze player participation a special case of contests is multiprize complete information all pay auctions

proposal power and majority rule in multilateral bargaining with costly recognition this paper studies a sequential bargaining model in which agents expend efforts to be the proposer in equilibrium agents effort choices are influenced by the prize and cost effects the endogenous prize is 9

externalities in recruiting external recruiting at least weakly improves the quality of the pool of applicants but the incentive implications are less clear using a contest model this paper investigates the pure incentive effects of external recruiting our results show that if workers are heterogeneous opening up a firm s career system may lead to a homogenization of the pool of contestants and thus encourage the firm s high ability workers to exert more effort if this positive effect outweighs the discouragement of low ability workers the firm will benefit from external recruiting if however the discouragement effect dominates the homogenization effect the firm should disregard external recruiting in addition product market competition may mean that opening up the career system becomes less attractive for a firm since it increases the incentives of its competitors workers and hence strengthens the competitors

politician preferences law abiding lobbyists and caps on political contributions the effect of a contribution cap is analyzed in a political lobbying game where the politician has a policy preference in contrast to the previous literature without politician policy preferences more restrictive binding caps always reduce expected aggregate contributions however the initial imposition of a cap increases contributions if the politician mildly favors the low valuation lobbyist s policy the introduction of policy preferences permits analysis of monied interests policy influence a more restrictive cap makes it more likely that the politician enacts the policy he would have enacted in the absence of lobbying even in cases where expected aggregate contributions increase

doubts and dogmatism in conflict behavior we consider a conflict under incomplete information where two opponents fight to impose their preferred policy before the conflict one opponent the agent trusts the information received by his principal under some conditions the principal induces hawkish attitudes in the agent the agent never doubts the optimality of his preferred policy conflicts are violent and bad decisions are sometimes made under other conditions the agent believes that his opponent may be right even when all evidence indicates that the policy preferred by the opponent is certainly suboptimal in this case the agent adopts dovish attitudes and conflicts are less violent

markets for ideas prize structure entry limits and the design of ideation contests contests are a popular mechanism for the procurement of innovation in marketing design and other creative industries firms use freelance marketplaces to organize contests and obtain high quality ideas for ads new products and even business strategies from participants a central question faced by contest sponsors is how to appropriately structure prizes and entry regulations i develop an empirical model of idea generation ideation contests and investigate the impact of the number of prizes prize amount and submission limit on participation and quality outcomes using data from a popular marketing ideation platform the model explains participant submission decisions jury ratings and sponsor rankings of winning submissions counterfactuals reveal the impact of design parameters on outcomes and provide guidance for the optimal design of ideation contests and platforms

contests with an unknown number of contestants this paper studies rent seeking contests where the contestants do not know the number of actively competing contestants two models are compared in the first all players are risk neutral in the second all have constant absolute risk aversion if the expected fraction of active contestants is low an increase in the number of potential contestants increases individual rent seeking efforts this effect is in contrast to the complete information case where individual rent seeking efforts decrease in the number of contestants the effect is more likely under risk neutrality but also possible under risk aversion equilibrium rent seeking efforts are lower under risk aversion if and only if the expected fraction of active contestants is low

caps in sequential contests i introduction in many competitions we can often observe situations where severe constraints are imposed on contestants for example in the u s electoral campaign there is a specific maximum campaign contribution that a single agent can make to a candidate 1 in sports where equipment plays a major role e g sailing motor races etc explicit or implicit technological constraints are imposed on the allowed equipment also several sports leagues e g the national basketball association nba implement a salary cap which places a limit on the total amount of money a team can spend on players salaries salary caps are clearly binding and teams are sometimes forced to trade expensive players in order to make place for other needed team members the usual reason for applying salary caps is that they facilitate even competition between small and large city teams otherwise large city teams could pay more buy the best talent and ultimately destroy any semblance of competition in the league the goal of caps imposed by designers of competitions is to create what we call a competitive balance so that many players have a chance to win and not necessarily the strongest ones in addition if the contest is more competitively balanced the uncertainty of the outcome is higher and therefore the contest is more attractive furthermore competitive balance may lead to an improvement of the expected total performance of all the players rather than just the performance of the top player several other ways have been suggested to enhance the competitive balance in contests for example baye kovenock and de vries 1993 showed that in all pay auctions contests by excluding the strongest player the player with the highest value of winning the contest becomes more competitively balanced and then the players expected total bid may increase moldovanu and sela 2001 found that in all pay auctions under incomplete information when cost functions are convex several positive prizes may be optimal for a designer who wishes to maximize the expected total bid in other words by increasing the number of the prizes the chances of the players with relatively low values of winning to win one of the prizes increase and therefore these players will increase their efforts accordingly cohen kaplan and sela 2008 studied all pay auctions with effort dependent rewards under incomplete information and demonstrated that when the designer maximizes the total bid effort and when there is a sufficiently large number of contestants the optimal reward decreases in the contestants bid this means that a designer will offer higher prizes to the players with relatively low values of winning those who exert lower efforts than to the players with relatively high values of winning those who exert higher efforts such a distribution of prizes balances the bids submitted by the players with high and low values of winning we focus here on the role of bid caps to enhance the competitive balance in contests relatively weak players players with low abilities or low values of winning usually exert low efforts which are lower than the level of the bid cap imposed by a designer in a contest with a bid cap if these players exert an effort that is equal to the bid cap they will have a higher chance to win since no one can exert a higher effort than the bid cap thus the weak players exert more effort than they would in a contest without a bid cap however relatively strong players players with high abilities or high values of winning usually exert higher efforts than the level of the bid cap thus the strong players exert less effort than they would in a contest without a bid cap hence the effect of the bid cap on the players total effort depends on the trade off between the increase of the weaker players efforts and the decrease of the stronger players efforts to be fully effective the bid cap system must guarantee that as many players as possible raise their efforts to the level of the bid cap and as less as possible reduce their efforts to this level

contest efforts in light of behavioural considerations this study shows that distortion of probabilities is a possible reason for rent under dissipation incontests with relatively small number of participants such distortion may also result however inover dissipation of the contested rent focusing on contests with homogeneous contestants and thecommonly studied contest success function our main results clarify under what circumstances i rents are more under dissipated relative to the standard situation where probabilities are notdistorted ii rents are under dissipated yet less intensely relative to the standard situation whereprobabilities are not distorted iii rents are over dissipated and iv the contest does not possess asymmetric interior equilibrium in pure strategies

investment in the absence of property rights the role of incumbency advantages in many situations the individuals who can generate some output must enter a contest for appropriating this output this paper analyses the investment incentives of such agents and the role of incumbency advantages in the contest depending on the advantages an increase in the productivity of the investment can decrease or increase the amount of investment the results are applied to autocrats investment behavior and job specific investment in organizations

campaign finance regulation with competing interest groups abstract regulatory caps on contributions to political campaigns are the cornerstones of campaign finance legislation in many established democracies and their introduction is considered by most emerging ones are these regulations desirable this paper studies contribution caps in a menu auction lobbying model with limited budgets and costly entry in the absence of entry contribution caps improve welfare by leveling the political playing field with entry however a competition effect and a bargaining effect may arise resulting in inefficient entry and exit decisions in particular a cap may lead to worse policies than the status quo and even if better policies are chosen the resulting gain in welfare may be more than offset by the entry costs regulation can also lead to the simultaneous entry of competing groups creating costly rent seeking on issues previously unaffected by lobbying

health issue commodity promotion impacts on us edible vegetable oil demand abstract analysis of monthly data for january 1980 through december 1990 provides evidence that an american soybean association asa promotional campaign focusing negative attention on the health issue of tropical oils induced structural change in us domestic consumption of edible palm and coconut oils evidence strongly suggests that the decline in tropical oil imports and consumption can be attributed to processor changes in inputs resulting from perceived consumer responses to the asa health issues campaign the study found prices of tropical oils to be insignificant in determining short run soybean and cottonseed oil demand conversely such domestic commodity promotion campaigns may have devastating s hort term impacts on imports which in turn are significant to the exports of a small number of producing countries if the perceived negative attributes are less serious than implied counter promotion may diminish consumers concerns over time or create new product markets and declining tropical oil imports might be only temporarily affected

lottery versus all pay auction models of lobbying i first provide a complete characterization of the unique equilibrium of the lottery game by n lobbyists with asymmetric valuations and then compare the lottery and the all pay auction models of lobbying i show that the exclusion principle discovered by baye kovenock and de vries 1993 for all pay auction does not apply to lottery i also show that the perverse effect that an exogenous cap may increase the total lobbying expenditure in a two bidder all pay auction discovered by che and gale 1998 does not apply to lottery

dynamic legislative decision making when interest groups control the agenda we consider dynamic decision making in a legislature in which in each period legislators vote between the status quo previous period s policy and a new bill however the agenda formation process is captured by interest groups that is the new bill on the agenda is determined by an all pay auction among these groups we show that convergence to the median voter of the legislature arises if interest groups are patient enough but not necessarily otherwise we characterize the bound on the speed of convergence in a family of stationary equilibria in which policy bounces between right wing and left wing policies we also show that convergence may be faster if organized interest groups represent only one side of the policy space e g when only business and not consumer interests are organized

restricted coasean bargaining we investigate the efficiency of coasean bargaining when restrictions are placed on the set of feasible bargaining outcomes when property rights are costly to defend appropriate we find bargaining restrictions may be pareto superior to unconstrainedvoluntary exchange under cost uncertainty over the harmful activity we show an efficient configuration of restrictions must balance the potential reduction in appropriation costs with the possibility of allocatively inefficient bargaining restrictions for an all pay auction we find conditions where precluding bargaining is always ex ante preferable to unrestricted bargaining for cases where the restrictions are contested we show conditions for the continuing existence of welfare improvements

recognition for sale abstract i examine the consequences of letting players compete for bargaining power in a multilateral bargaining game in each period the right to propose an offer is sold to the highest bidder and all players pay their bids if players vote according to any rule in which no player has veto power then the first proposer captures the entire surplus if a full consensus is needed for an offer to be accepted then the first proposer shares the surplus with at most one other player and as the period length between offers vanishes one player may capture virtually the entire surplus in settings with a stochastic or an endogenous surplus players are unwilling to efficiently delay agreement or invest in the surplus

bidding in hierarchies this paper reconsiders the comparison between hierarchical contests and single stage contests a condition is given that characterizes whether and when the aggregate equilibrium payoff of contestants is higher in the single stage contest and when the single stage contest is more likely to award the prize to the contestant who values it most highly the outcome depends on inter and intra group heterogeneity and is not driven by free rider incentives

bidding for a group specific public good prize abstract we examine the equilibrium effort levels of individual players and groups in a contest in which two groups compete with each other to win a group specific public good prize the players choose their effort levels simultaneously and independently and the winning group is determined by the selection rule of all pay auctions we first prove nonexistence of a pure strategy nash equilibrium and then construct a mixed strategy nash equilibrium at the nash equilibrium the only active player in each group is a player whose valuation for the prize is the highest in that group all the other players expend zero effort and the equilibrium effort levels depend solely on two values the highest valuation for the prize in each group

should we tax or cap political contributions a lobbying model with policy favors and access abstract this paper develops a model of political contributions in which a politician can either sell policy favors or sell access access allows interest groups to share hard information with the politician in support of their preferred policy here selling access maximizes policy utility while selling policy favors maximizes total contributions imposing a binding contribution limit makes it more likely that the politician sells access which can improve expected constituent welfare however a contribution limit distorts the signals associated with the contributions which tends to result in worse policy alternatively a tax on political contributions can ensure that the politician sells access without distorting his information therefore from the viewpoint of a representative constituent a tax on contributions is strictly preferred to a contribution limit or no reform the politician however may prefer regulation in the form of a contribution limit even when a tax is better for the constituent

all pay auctions with certain and uncertain prizes abstract we study all pay auctions with multiple prizes the players have the same value for all the certain prizes except for one uncertain prize for which each player has a private value we characterize the equilibrium strategy and show that independent of the ranking of the uncertain prize if the uncertain prize is not the lowest one a player s effort as well as his expected payoff increase in his value for the uncertain prize otherwise if this prize is the lowest one we obtain that a player s effort may decrease in his value for the uncertain prize but his expected utility increases

soft money and campaign finance reform we analyze special interest influence on policy when political contributions are capped but the regulation contains soft money loopholes the politician chooses between two policy options we define special interest influence as the probability the politician chooses the policy he would not have chosen in the absence of contributions any binding cap reduces special interest influence but the effect may be nonmonotonic a ban on contributions can result in greater special interest influence than a binding but nonzero cap the results may also have implications for the policy response to the 2010 supreme court ruling on citizens united v fec

liquidity constraints and the formation of unbalanced contests abstract we analyze the effects of future liquidity constraints on contestants investment in a dynamic contest model contestants invest in two consecutive contests to win a prize in each period the loser of the first period contest can be liquidity constrained in the second period due to too little remaining wealth the winner of the first contest can reinvest the prize in the second contest we show that future liquidity constraints mainly affect the imbalance of the contest in the future but not today surprisingly larger contest prizes decrease contestants future investments and amplify the imbalance of future contests however the contest organizer can reduce this imbalance by increasing the share of the prize money in the second contest

ambiguous political power and contest efforts when there is incomplete information on the source of power in a contest the contestants may divide their lobbying efforts between the potential centers of power only one of which determines the contests winning probabilities our analysis focuses on the effect of ambiguity regarding the source of power on the contestants aggregate effort in a symmetric simple lottery contest with two potential centers of power specifically we examine the effects of varying the informativeness of the contestants private signals i e the probability that a signal is correct and the degree of correlation between them our benchmark case is the standard tullock s model in which the source of power is known i e the contestants signals are perfectly informative we show that the level of aggregate effort in this case is reached also when the signals are perfectly uninformative however in any intermediate case the contestants aggregate effort is lower provided that the signals are not perfectly correlated in other words there is a u shape relationship between the informativeness of the signals and the aggregate effort in the contest the lowest level of effort is spent when the signals are independent and the probability that a signal is true is about 0 85 in this case efforts are reduced by about one fifth in comparison with the benchmark case from a rent dissipation of 50 to slightly over 40