Erschienen in:Working Paper of the Max Planck Institute for Tax Law and Public Finance ; No. 2019-08
Umfang:
1 Online-Ressource (24 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3394778
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 27, 2019 erstellt
Beschreibung:
In many real-world contests (political elections / lobbying for public projects), contestants try to engage supporters (unemployed youth / local residents) to fight for them. Such contests have the following features: a significant part of a contestant's supporter compensation is contingent upon the contestant winning the contest, and supporters are (at least partially) mercenary in that higher compensation offers do induce them to switch allegiance away from a ‘like-minded' contestant. We study a class of contests with the above features, where two contestants – a favourite and an underdog – recruit supporters by offering contingent (and non-contingent) compensations in cash or in excludable public goods like political access. Our analysis delineates contest equilibria with the following features: Contestants' offers of contingent compensations force potential supporters to choose their allegiance on the basis of predicted winners – and that act, in and of itself, enables the favourite to extend her lead. In some cases, it is possible that the underdog is doubly disadvantaged – her total compensation bill is no less than the favourite's though she manages to attract a smaller army of supporters and thus falls farther behind in the race. The contest is necessarily dissipative for the underdog: she would be strictly better off under a ban on the hiring of supporters (though she is the one who offers higher supporter compensation). In some cases, the availability of unemployed youth to act as supporters in contests causes everyone in the economy to lose (except, maybe, the supporters themselves)