Gil S. Epstein, Bar-Ilan University, Israel and CReAM, London, IZA, Bonn (email@example.com). Yosef Mealem, Netanya Academic College, Netanya, Israel.
Governing Interest Groups and Rent Dissipation
Version of Record online: 24 MAY 2012
© 2012 Wiley Periodicals, Inc.
Journal of Public Economic Theory
Volume 14, Issue 3, pages 423–440, June 2012
How to Cite
EPSTEIN, G. S. and MEALEM, Y. (2012), Governing Interest Groups and Rent Dissipation. Journal of Public Economic Theory, 14: 423–440. doi: 10.1111/j.1467-9779.2012.01549.x
Financial support from Adar Foundation of the Economics Department of Bar-Ilan University is gratefully acknowledged.
We are grateful to two anonymous referees for their constructive and productive comments. We are also grateful to Laura Shuck and Klarina Priborkin for helpful comments.
- Issue online: 24 MAY 2012
- Version of Record online: 24 MAY 2012
- Received January 12, 2009; Accepted October 5, 2010.
In a contest of group-specific public goods we consider the effect that managing an interest group has on the rent dissipation and the total expected payoffs of the contest. While in the first group there is a central planner determining its members’ expenditure in the contest, in the second group there are two different possibilities: either all the members are governed by a central planner or they are not. We consider both types of contests: an all-pay auction and a Logit contest success function. We show that while governing an interest group decreases free-riding, it may as well decrease the rent dissipation; at the same time the expected payoffs of the groups may also decrease.