Abstract
To compete in political contests, politicians need their supporters to contribute resources. We investigate how politicians can best allocate group-based prizes on a contingent basis to incentivize individual members of a group to exert effort on their behalf. We contrast contingent contracts with tournament style contests (Lazear and Rosen (Rank-order tournaments as optimum labor contracts. J Political Econ 1981; 89(5): 841–864)) and characterize when tournaments that create intergroup contests for prizes elicit more contributions than contingent contracts. By tying the allocation of prizes to the observed level of effort made by each group, politicians ameliorate the collective action problem that is created by the fact that each individual’s effort has only a minimal impact on the overall political contest. We examine the relative performance and stability of intergroup tournaments as a function of the number of groups and asymmetric group size.
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