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Summary

In Chapter 10, contest models are utilized to illuminate crucial elements of traditional economic problems. These include competition for surplus within divisionalized firms, where inefficient divisions often dominate efficient ones; the significant expenses required to attain a monopoly position, including potentially bribing public officials for the allocation of monopoly rights; and the expenses incurred in obtaining property rights that, once secured (sometimes by violent and costly means), will be efficiently exchanged in the marketplace. In the last two cases, these expenses are so substantial that they might leave no social surplus. Additionally, the cost of political campaigns, in which factions compete for the vote to control a portion or entirety of the public sector through convincing voters of the correct choice, is also examined. Overall, it is shown that contests introduce a substantial and previously unnoticed welfare cost to the traditional issues studied, thereby complementing the existing literature on the subject.

Contest theory is an important part of game theory used to analyse different types of contests and conflicts. Traditional microeconomic models focus on situations where property rights are well defined, and agents voluntarily trade rights over goods or produce rights for new goods. However, much less focus has been given to other situations where agents do not trade property rights, but rather fight over them. Contests: Theory and Applications presents a state-of-the art discussion of the economics of contests from the perspective of both core theory and applications. It provides a new approach to standard topics in labour, education, welfare and development and introduces areas like voting, industrial organisation, mechanism design, sport, and military conflict. Using elementary mathematics, this book provides a versatile framework for navigating this growing area of study and serves as an essential resource for its wide variety of applications in economics and political science.

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10 - Contests in Classical Problems: Divisionalization, Monopoly Welfare Losses, Coase Theorem, Voting

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Contests

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10 - Contests in Classical Problems: Divisionalization, Monopoly Welfare Losses, Coase Theorem, Voting

Summary

Contests