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Article

A Virtuous Circle of Governance Contests with Externalities

1
Department of Economics, Chosun University, 309 Philmoondaero, Dong-gu, Gwangju 61452, Korea
2
Department of Economics, University of Wyoming, 1000 E. University Avenue, Laramie, WY 82071, USA
*
Author to whom correspondence should be addressed.
Academic Editor: Jean-Pierre Gueyie
Sustainability 2021, 13(14), 7766; https://0-doi-org.brum.beds.ac.uk/10.3390/su13147766
Received: 19 June 2021 / Revised: 7 July 2021 / Accepted: 9 July 2021 / Published: 12 July 2021
Governments create contests to allocate resources to stakeholders, e.g., grants, contracts. The actions of these stakeholders can generate a positive externality for themselves—the contest winner can attract additional outside funding and donations from third-parties who want to jump on the winner’s bandwagon. Herein we examine the externalities arising from these contests created by governance and their impact on a virtuous circle of governance contests. Among various conditions that make governance virtuous, we focus on the equilibrium expected payoffs of stakeholders, the difference in them, and the rent-dissipation rates. Our study shows that the impact of externalities on the efficiency of governance depends on two key factors: (i) the choice of governance contests, the player-externality and the winner-externality, and (ii) the relative efficiency of stakeholders’ efforts. View Full-Text
Keywords: expected payoff; externality; governance contest; rent dissipation; virtuous circle expected payoff; externality; governance contest; rent dissipation; virtuous circle
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MDPI and ACS Style

Park, S.-H.; Shogren, J.F. A Virtuous Circle of Governance Contests with Externalities. Sustainability 2021, 13, 7766. https://0-doi-org.brum.beds.ac.uk/10.3390/su13147766

AMA Style

Park S-H, Shogren JF. A Virtuous Circle of Governance Contests with Externalities. Sustainability. 2021; 13(14):7766. https://0-doi-org.brum.beds.ac.uk/10.3390/su13147766

Chicago/Turabian Style

Park, Sung-Hoon, and Jason F. Shogren 2021. "A Virtuous Circle of Governance Contests with Externalities" Sustainability 13, no. 14: 7766. https://0-doi-org.brum.beds.ac.uk/10.3390/su13147766

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