Effort and Performance in Public-Policy Contests



contestants’ stakes, assuming that the functions ni(I) ( i = L, H) are continuous and
twice differentiable in
I. A policy reform may affect the stake of one of the
contestants or the stakes of both of them. Denoting the effect of a change in
I on ni by
ni

n i , n,i =i-, our subsequent analysis relates to all of the following five possible
I

types of public-policy effects on the stakes of the interest groups:

Table 1:The Possible Types of a Policy Reform

Type

n ' i

n ' j

(i)

>0

<0

(ii)

>0

=0

(iii)

=0

<0

(iv)

>0

>0

(v)

<0

<0

In reforms of type (ii) and (iii), a change in I only affects the stake of one interest
group. The incidence of the proposed policy reform in these cases is therefore partial.
A change in
I can be interpreted as a more (less) restrained government intervention if
it reduces (increases) the affected stake. Clearly, such a change also affects the stakes-
asymmetry between the contestants. For example, in type (ii) reform where
i=H, an
increase in
I represents a less restrained intervention that increases the asymmetry
between the stakes of the contestants.

In the remaining types the incidence of the proposed reform is complete because
a change in
I affects the stakes of the two contestants. In reforms of type (i) a change
in the policy instrument
I has opposite effects on the stakes of the two players. If
i=H, such a change positively affects the asymmetry between the stakes of the
contestants. If
i=L, the asymmetry between the stakes is inversely related to a
change in
I. In both cases a change in the proposed policy can be considered as a more
restrained government intervention if it reduces the sum of the stakes
nL + nH .

In reforms of type (iv) and (v) a change in I has a similar positive or negative
effect on the stakes of the players. In both of these cases, therefore, such a change can



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