Contests for Power

Stergios Skaperdas
University of California-Irvine

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     Last modified: March 11, 2011
     Presentation date: 03/12/2011 6:15 PM in NH 2405, Plenary Session
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Abstract
Contests for power are defined as those that (i) involve costly efforts that are adversarially combined and (ii) the efforts have no positive externalities to third parties. Examples include instances of both violent and non-violent conflict such as hot and cold wars, crime, litigation, lobbying and rent-seeking. After arguing for the empirical relevance and quantitative economic significance of contests for power, I will explore the implications of a number of models that embed contests for power within bargaining frameworks or general equilibrium settings. In straightforward extensions of basic models of exchange, compensation is inversely related to marginal productivity; prices depend on relative power, as well as on preferences and endowments; exchange itself can be foreclosed by enforcement costs; the costs of effort critically depend on governance and norms of behavior; wage subsidies, land reform and other seemingly inefficient arrangements can be rationalized as appropriate policies in second-best settings; and comparative advantage is distorted in the presence of contests for power. Time permitting, I will discuss how aspects of modern governance can be thought of as reducing the cost of contests for power.