Social decision rules are not immune to conflict

Why is rent-seeking so endemic in societies? Might it not be possible to design a Pareto-improving social decision rule that sidesteps the inefficient waste of resources resulting from conflict? We study this question for a multi-player contest. We assume that a benevolent planner knows the winning payoffs, the effectiveness of each rent-seeker, that the cost of expending resources is isoelastic, and that it is the same across all players. But she does not know the precise value of this elasticity. We show that this minimal lack of information leads to the impossibility of a Pareto-improving social decision rule, as long as there are at least four agents. Copyright Springer-Verlag Berlin Heidelberg 2001