Contractual Incentive Provision and Commitment in Rent-Seeking Contests

Gürtler, Oliver (March 2006): Contractual Incentive Provision and Commitment in Rent-Seeking Contests. SFB/TR 15 Discussion Paper No. 100

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.

• Item Type: Paper
• Keywords: Contest, First-Mover Advantage, Commitment, Wage Contract
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B4 - Die Gestaltung von Turnieren im Rahmen der Corporate Governance
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: D72, M52
• Language: English