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 n_i by
∂n_i

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

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 n_L + n_H .

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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