Perfectly Secure Property Rights, Incentives, and Production Inefficiencies in Tullock Contests

From the point of view of institutional economics, property rights are an instrument to shape individual incentives efficiently. For the case of a Tullock contest with endogenously determined rent, I analyze the circumstances under which perfectly secure property rights emerge in an economy where the security of property is endogenously determined. I analyze different sequential structures for the determination of defensive and appropriative investments and determine the equilibrium sequence of moves if the sequential structure is endogenous. It turns out that in subgames where perfectly secure property rights emerge, incentives for
production are still inefficient. In addition, it can be shown that the endogenous determination of moves leads to a sequence of events that result in open conflict even if perfectly secure property rights would have been an alternative.