Contractual incentive provision and commitment in rent-seeking contests

Oliver Gürtler

In this paper, we consider a symmetric rent-seeking contest, where employees lobby for a governmental contract on behalf of firms. The only verifiable information is which firm is assigned the contract. We derive the optimal wage contracts of the employees and analyze, whether commitment by determining the wage contract prior to the competitor is profitable. This is indeed the case, i.e. firms prefer to move first in the wage-setting subgame. This complements previous work on rent-seeking contests emphasizing that commitment via rent-seeking expenditures is unprofitable in symmetric contests.

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Year of publication:	2006
Authors:	Gürtler, Oliver
Publisher:	München : Sonderforschungsbereich/Transregio 15 Governance and the Efficiency of Economic Systems
Subject:	Contest \| First-Mover Advantage \| Commitment \| Wage Contract \| Rent-Seeking \| Rent seeking \| Spieltheorie \| Game theory \| Leistungsanreiz \| Performance incentive \| Vertrag \| Contract \| Prinzipal-Agent-Theorie \| Agency theory \| Vertragstheorie \| Contract theory \| Markteintritt \| Market entry \| Arbeitsvertrag \| Labour contract