Rent-Seeking Contest When the Prize Increases with Aggregate Efforts.

The objective of this article is to investigate contests in which efforts are productive. G. Tullock's standard rent-seeking model is extended by making the rent itself increase with the aggregate efforts. A positive externality is thereby introduced into the contest because a contender's private effort in quest of the rent generates a benefit for other contenders. Coupled with a negative externality presented in the standard rent-seeking model, the net effect on the social efficiency of the contest is a priori ambiguous. It is shown that the extended contest generates socially wasteful, excessive aggregate efforts. Copyright 1996 by Kluwer Academic Publishers