Contractual Incentive Provision and Commitment in Rent-Seeking Contests

Oliver Gürtler

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: 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.

Keywords: Contest; First-Mover Advantage; Commitment; Wage Contract (search for similar items in EconPapers)
JEL-codes: D72 M52 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-mic and nep-pol
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