RENT-SEEKING CONTEST WHEN THE PRIZE INCREASES WITH AGGREGATE EFFORTS

The objective of this article is to investigate contests in which effo rts are productive. Tullock's standard rent-seeking model is extended by making the rent itself increase with the aggregate efforts. A posit ive externality is thereby introduced into the contest, because a cont ender's private effort in quest of the rent generates a benefit for ot her contenders. Coupled with a negative externality presented in the s tandard rent-seeking model, the net effect on the social efficiency of the contest is apriori ambiguous. It is shown that the extended conte st generates socially wasteful, excessive aggregate efforts.