risk aversion in contests in a contest participants spend money or effort to increase their chances of winning a prize the authors examine primarily the following question could the timid the more risk averse have a better chance of winning in contests under limited liability the answer is always positive in the absence of limited liability there is no single answer whereas when the prize is shared as a function of effort the outcome is independent of the contestants risk aversion the authors also relate their results to self protection and examine some other implications of risk aversion copyright 1995 by royal economic society

an econometric analysis of exploration and extraction of oil in the u k continental shelf this paper develops an econometric model for the analysis of exploration and production policies of price taking suppliers and derives theoretically consistent exploration and output equations for oil which explicitly take account of the oil discovery process and the intertemporal nature of exploration and production decision the model is then applied to an empirical analysis of oil exploration and extraction on the united kingdom continental shelf ukcs over the period 1978 1 1986 4 the analysis explicitly takes account of the available engineering information concerning the pressure dynamics of the petroleum reserves and the geological knowledge pertinent to the discovery process and presents formal statistical tests of the significance of these factors for the explanation of output and exploration in the north sea copyright 1990 by royal economic society

risk aversion and prudence in rent seeking games this paper considers a common n agent symmetric rent seeking game it derives conditions so that risk aversion and risk always decrease rent seeking efforts these conditions hold for any regular contest success function when risk averse rent seekers are also prudent under n 2 prudence is a necessary and sufficient condition for risk aversion to decrease rent seeking efforts compared to risk neutrality an intuition for this result is given based on a self protection model

oil and natural gas prospects in south america can the petroleum industry pave the way for renewables in brazil abstract a large share of brazil s current investments is concentrated in the development of petroleum resources in new frontiers perspectives for large offshore pre salt fields are particularly good however challenges are also huge on one hand pre salt resources development will draw vast amounts of economic and human resources and pose significant macroeconomic risks on the other hand the petroleum industry can generate multiplicative effects into the country s economy and even more importantly generate rents that can be diverted towards the promotion of renewable energy sources this paper simulates the rent generation of brazil s petroleum development up to 2030 according to the country s current fiscal regime projections of petroleum supply and a probability analysis of brent price evolution and assesses how these economic resources if properly allocated can pave the way for an increased use of renewables in brazil findings show that an ambitious energy innovation program based on a target oriented agency plus a program for solar development would cost less than half the minimum average annual petroleum rent free for investing in renewables between 2013 and 2030 the remaining budget could improve the security of ethanol fuel supply by avoiding the negative impacts of sugar prices spikes on brazil s ethanol production

rent seeking contests with incomplete information we consider rent seeking contests with two players who each have private information about their own cost of effort we consider both discrete and continuous distributions of costs and give results for each case focusing on existence of equilibrium

rent seeking and the provision of public goods in this short paper i adopt the public choice school paradigm of modeling a government in order to compare its performance with that of the market in the standard model of the provision of public goods private provision is represented by the cournot nash equilibrium in individual contributions public provision incorporates rent seeking whereby some of the aspects of the allocation are determined indirectly by influence activities of the interested parties thus both allocation procedures yield inefficiency and the question is which procedure results in a greater amount of inefficiency private provision with its free riding incentives or public provision with its rent seeking incentives the results indicate that public provision may well be preferred to private provision of public goods thus superiority of private provision is not guaranteed even in the case of a non benevolent government copyright 1993 by royal economic society

winner take all and proportional prize contests theory and experimental results abstract this study provides a unified framework to compare three canonical types of contests winner take all contests won by the best performer winner take all lotteries where probability of success is proportional to performance and proportional prize contests in which rewards are shared in proportion to performance we derive equilibria and observe outcomes from each contest in a laboratory experiment equilibrium and observed efforts are highest in winner take all contests lotteries and proportional prize contests have the same nash equilibrium but empirically lotteries induce higher efforts and lower more unequal payoffs behavioral deviations from theoretical benchmarks in different contests are caused by the same underlying attributes such as risk aversion and the utility of winning finally we find that subjects exhibit consistent behavior across different types of contests with subjects exerting higher effort in one contest also exerting higher effort in another contest

handling financial resource mobilisation in technological innovation systems the case of chinese wind power to mitigate climate change a rapid and large scale expansion of sustainable innovations such as renewable energy technologies is crucial china s track record of wind power development shows both speed and scale that can provide valuable knowledge of how to stimulate and maintain transformation of energy systems the growth was made possible partly by ample access to financial capital however the rapid growth also led to growing pains and made the industry face increasing financial constraints while these constraints partly relate to structures and trends that are external to the wind power innovation system they were also a consequence of the particular path taken in chinese wind power development the case demonstrates that if a full fledged industry is to be developed and sustained a balanced growth is required and all innovation system functions need due attention sooner or later conceptually the article contributes by further exploring how mobilisation of financial resources affect and is affected by overall system dynamics

a multi winner nested rent seeking contest this paper considers a symmetric imperfectly discriminating rent seeking contest in which there may be several winners we first demonstrate a serious flaw in previous work and then go on to suggest an alternative method for analyzing the contest in contrast to the previous work we show that the value of the rent is fully dissipated in equilibrium as the number of players becomes large

transfers or public good provision a political allocation perspective abstract employing an extended rent seeking model this paper focuses on the problem faced by an optimizing politician of allocating a given budget among monetary transfers to individuals monetary transfers to groups and public good transfers to groups

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

setting the stakes in environmental contests abstract firms are frequently in conflict with environmental groups over planning and other decisions standard contest models assume that stakes are exogenously defined which is inappropriate in settings such as application for building permission in which one player also acts as proposer assuming that proposers foresee environmental opposition they will adjust their proposals strategically by introducing an additional stage to the lobbying game the full impact of the dispute process can be reckoned the structure of the game the order in which the players move is shown to have a significant impact on social welfare and may warrant intervention among other things there may be social gains to forcing the developer to move last in planning disputes

laffer paradox leviathan and political contest this paper considers a political contest model wherein self interested politicians seek rents from the public budget while general voters make political efforts to protest against politicians rent seeking directly for example through voting in referendums such as the passage of proposition 13 or indirectly for example through donating money to organized groups such as the national taxpayer union we show that the political contest may ironically lead to the laffer paradox that is rent seeking politicians may intend to set the tax rate higher than the revenue maximizing rate for taming leviathans political protests may not be as effective as competition among governments

competitive blind spots and the cyclicality of investment experimental evidence we report laboratory experiments investigating the cyclicality of profit enhancing investment in a competitive environment in our setting optimal investment is counter cyclical when investment costs fall following market downturns however we do not observe counter cyclical investment instead we see much less strategic behavior than our rational investment model anticipates our participants exhibit what porter 1980 terms a competitive blind spot and heuristic investment models where individuals invest a fixed percentage of their liquidity or a fixed percentage of anticipated market demand better fit our data than does optimal investment we also report a control treatment without cost changes and a treatment with asymmetric investment liquidity both of these extensions support our main result

competing for market shares does the order of moves matter even when it shouldn t abstract this paper investigates whether the order of moves affects behavior and outcomes even in the absence of material incentives for pre commitment evidence from laboratory experiments with shared rents symmetric players and either a simultaneous or a sequential move order suggests that it is an inherent advantage to move second rather than first the reason is that first movers face strategic uncertainty while second movers have the power to ultimately determine the outcome through their investment choices many first movers acknowledge this power and decrease investments below the standard prediction which is interpreted as an attempt to collude this strategy leads to higher absolute payoffs for the first movers compared to a situation where they do not try to establish collusion however relative payoffs are low since collusive outcomes are typically asymmetric to the advantage of the second mover

rent seeking contest when the prize increases with aggregate efforts the objective of this article is to investigate contests in which efforts are productive tullock s standard rent seeking model is extended by making the rent itself increase with the aggregate efforts a positive externality is thereby introduced into the contest because a contender s private effort in quest of the rent generates a benefit for other contenders coupled with a negative externality presented in the standard rent seeking model the net effect on the social efficiency of the contest is a priori ambiguous it is shown that the extended contest generates socially wasteful excessive aggregate efforts

endogenous sharing rules in collective group rent seeking this paper examines the possibility of endogenous determination of intra group sharing rules in a collective group rent seeking game collective group rent seeking is considered as a two stage nash cournot game in which sharing rules are determined prior to individual decision on voluntary contribution the solution is subgame perfect and is obtained by backward induction in competition between two groups of the same size the nash equilibrium sharing rule of each group is to distribute rent to each according to relative effort total rent seeking outlays in this case are equal to those obtained by tullock 1980 when more than two groups compete for a rent the sharing rule based on relative effort is again likely to be the nash equilibrium strategy of each group the amount of total rent seeking outlays is also equal to that in tullock 1980 in a nutshell the rent is substantially dissipated if sharing rules are endogenously determined

collective rent dissipation the theory of rent seeking was initiated by tullock 1967 1980 followed by krueger 1974 and posner 1975 and more recently extended in various directions by allard 1988 appelbaum and katz 1986a b c gradstein and nitzan 1989 hillman and katz 1984 1987 hillman and samet 1987 hillman and riley 1989 katz et al 1990 long and vousden 1987 ursprung 1990 and varian 1989 the purpose of this paper is to extend this theory by introducing the possibility of collective group rent seeking with voluntary individual decisions regarding their extent of participation in the collective rent seeking efforts

dynamic rent seeking abstract a dynamic model of the political process is presented under conditions of uncertainty as in an earlier model by becker several interest groups vie for political influence exerted in the form of taxes and subsidies some results of the static single interest group theory of rent seeking are given slightly modified interpretations among other things it is shown that a group s rent seeking activity is negatively related to the rate of growth of national income to the group s relative position in the income distribution and to measures of how deserving it is the importance of voting is modelled explicitly it is also found that policies tend to be adopted which minimize the deadweight welfare losses from rent seeking

risk averse rent seeking with shared rents this paper presents a nash equilibrium model of rent seeking behavior in which risk averse players expend resources to obtain a share of a rent as for example in contests for import quota licences results are obtained relating the equilibrium level of lobbying effort by each player to the value of the rent in particular reduced individual lobbying effort is associated with higher rents contested if players are sufficiently risk averse the question of whether the value of rents is a good measure of the resource cost of rent seeking is also considered a simple approximation involving risk and risk aversion parameters is derived for the proportion of rents dissipated in long run equilibrium risk and risk aversion are seen to reduce the rent dissipation ratio below unity copyright 1987 by royal economic society

the maturation and growth of infant industries the case of korea abstract this paper first shows that contrary to evidence from most developing countries korean infant industries under protection have tended to mature it also shows that output grows faster in infant industries than in mature ones the paper then discusses probable factors that have made the maturation and growth of infant industries possible in korea overall the empirical evidence and its interpretation support the revisionist rather than neoclassical or market friendly view in the recent debate on east asian industrialization

the bias in favor of pro tariff lobbies abstract we show that the probability of success of the pro tariff lobby defined as a decreasing function of the ratio of consumer loss to producer gain rent generated by the tariff rises with the tariff under very general conditions this appears as an exception to becker s view that less distortionary measures tend to be adopted over their more distortionary counterparts we then provide a micro foundation for our probability definition using the imperfectly discriminating lobbying framework

efficient status seeking externalities and the evolution of status games abstract status seeking games are games in which an individual s utility is determined by his relative expenditure on status seeking activities rather than his absolute consumption there are a number of parallels between status seeking and rent seeking activities for example a tendency for pareto excessive private investment however many status seeking activities differ from rent seeking activities insofar as they generate significant benefits to individuals not actively involved in the game given an array of more or less productive status seeking games it is likely that relatively efficient status conferring mechanisms will tend to displace less efficient ones

rent seeking with uncertain opposition abstract it is observed that sometimes dispersed interests are passive to rent seeking by concentrated interests and that sometimes they provide rigorous opposition this paper assumes that opposing political activism is triggered when rents accruing to concentrated interests exceed a threshold level unknown to the latter in these conditions rents will increase asymptotically to a level less than the trigger level the threat of opposition means that social costs of rent seeking may be less than found by static analysis under certainty the model may be applicable to certain types of regulation such as taxi licensing or pollution control

entry into winner take all and proportional prize contests an experimental study this experiment compares the performance of two contest designs a standard winner take all tournament with a single fixed prize and a novel proportional payment design in which that same prize is divided among contestants by their share of total achievement we find that proportional prizes elicit more entry and more total achievement than the winner take all tournament the proportional prize contest performs better by limiting the degree to which heterogeneity among contestants discourages weaker entrants without altering the performance of stronger entrants these findings could inform the design of contests for technological and other improvements which are widely used by governments and philanthropic donors to elicit more effort on targeted economic and technological development activities

the east asian miracle study does the bell toll for industrial strategy the world bank s east asian miracle study1 has been anticipated with considerable interest by the development community it was intended not least by the japanese government that financed it to be an objective re examination of the role of government interventions in economic particularly industrial development it reflected a widespread unease that the bank was too strongly committed to a neoliberal view of the development process 2 this approach evolved over the 1980s drawing mainly upon evidence from east asia and fuelled by a shift in mainstream economics and political perceptions in the leading developed countries it formed the basis of the bank s subsequent lending and policy advice and was at the core of the structural adjustment programs that have shaped policy in many developing countries this review confines itself to the study s analysis of industrial policy concentrating on the approach and the analysis of the established nies the four tigers

rent seeking incentives in share contests abstract this article investigates share contests in our framework we allow contestants to have more general preferences than have been used in the literature previous approaches have the unfortunate characteristic that contestants marginal rates of substitution between the rent share allocated by the contest and their effort is constant regardless of the size of the rent share this results in a conventional wisdom larger rents command more effort by providing a more general framework we show the reverse may also be true and we derive the conditions under which this is the case our approach then allows us to rationalize within a standard contest framework observations that rents might be more hotly contested when they become scarcer as has evidently been the case with the recent global contraction of public funds available for public policy

opec behavior a test of alternative hypotheses since interpretations of past and future oil price patterns depends on the model chosen the author tests and compares alternative theories of opec as a first step in validating the choice on any one model the results show that among opec countries the partial market sharing cartel model is the only model not rejected by at least some of the 11 members and gives the best explanation of production in comparison with 11 non opec countries the competitive model could not be rejected for 10 of the 11 non opec producers this raises the question of why if opec is a cartel friedman s predictions have not come true and introduces new questions for future research 19 references 3 tables

forecasting activity levels in the uk continental shelf the role of perceptions the explicit treatment of the role of perceptions in modelling forecasts is uncommon with respect to future activity levels in the uk continental shelf using the flexibility of add factors in econometric forecasts this article demonstrates that in addition to price variations forecasts are sensitive to perceptions about future resource discovery and recovery rates a medium sized multivariate system reflecting the feedback structure of the petroleum supply process was formulated estimated and used to forecast activity levels

impact of the oil price and fiscal facilities on offshore mining at the dutch continental shelf abstract the surge in the oil price has raised questions about the magnitude of global reserves of oil according to some analysts the current high oil prices indicate a looming decline in the global production of oil others believe however that the increased level of the oil price encourages exploration and production activities bringing the oil price to a lower equilibrium level in the near future in this paper we assess the impact of the unit profit depending on the oil price as well as fiscal facilities on the level of exploration and development drillings in the dutch continental shelf we conducted an econometric analysis of exploration and development drillings in the dutch continental shelf over the period 1981 2003 except a few fiscal changes the regulatory framework for offshore activities in the netherlands the so called small fields policy was unchanged in this period we find that the expected unit profit based on a moving average of the oil price significantly explains the level of both exploration and development drillings in addition the analysis suggests that fiscal facilities have only a temporary effect on exploration activities but are more important for development activities we conclude that the oil price is a major economic incentive for activities of the mining industry

the length of the infant industry period evidence from the engineering industry in south korea abstract in the literature on industrialization very little is known about the length of the infant industry period this paper argues that the paucity of knowledge in this area is a serious weakness evidence from perhaps the most successful country of the past 20 years south korea suggests that the learning time in the engineering industry is much longer than anticipated two decades does not seem to be unusual it is also argued that due to both the speed of technical change and the globalization of industries the learning time has been extended in the past decades tentative implications are drawn for industrialization models and for industrial policy

changes in budgetary allocations and international comparisons of the social cost of rent seeking a critical note the katz rosenberg measure of rent dissipation across countries fails to encompass the consequences of different political systems wherein allocations are made observations about fiscal federal structures and the particular political structures of different countries affect political discretion in allocating government transfers owing both to the absence of these considerations which are indeed self evident and some other considerations regarding the measure the cross country rankings that katz and rosenberg present are meaningless at best and at worst misleading

rent seeking for pure public goods in this paper we present a formal analysis of rent seeking for public goods by two or more groups with different numbers of individuals we begin by considering equally wealthy groups under risk neutrality a case which constitutes our basic model several surprising and interesting results emerge from the analysis of this basic case the problem is then extended to deal with a groups with different wealth levels and b risk aversion this last extension brings about a further crop of interesting and useful results

the uniqueness of pure strategy nash equilibrium in rent seeking games with risk averse players this article proves that if each player s measure of absolute risk aversion is nonincreasing in his her wealth then there exists a unique pure strategy nash equilibrium in the general rent seeking game where risk averse players can coexist with risk neutral players attitude toward risk can differ among players and concave production functions for lotteries are not necessarily the same among players

risk averse rent seekers and the social cost of monopoly power there is now quite general recognition that the social cost of monopoly power encompasses the resources expended by individuals seeking to become the beneficiaries of monopoly rents however since the activity of rent seeking is generally not observable direct estimates of resources expended in quests to acquire monopoly power are usually impossible to come by 1 as a consequence the indirect approach of taking the observed value of monopoly rents as indicative of the unobserved value of the resources expended in rent seeking is quite generally adopted in approaches to evaluation of the social cost of such activity

mr keynes and the neo schumpeterians contributions to the analysis of the determinants of innovation from a post keynesian perspective abstract the purpose of this paper is to discuss the importance of knowledge both tacit and codified in the formation of the state of long term expectations that drive firms decisions to search for innovation and to investment in r d the paper takes the post keynesian theory as reference associating it with the neo schumpeterian analysis of innovation dynamics first it is argued that knowledge plays a crucial role in building agents confidence emphasizing that radical innovations are more dependent on the accumulation of codified knowledge given the higher degree of uncertainty associated with this type of innovation while incremental innovations are more dependent on tacit knowledge about the current market conditions and technological trajectory second it is argued that the accumulation of knowledge and the constant introduction of innovations foster the creation of a convention to innovate which facilitates the decision to pursue innovations by influencing long term expectations

long run equilibrium and total expenditures in rent seeking the lure of excess profits or rents associated with monopoly power gives rise to expenditures to obtain these rents competitive rent seeking behavior is recognized as a factor which must be included among the wastes associated with monopoly power tullock 1967 posner 1975 1 the expenditures are aimed at transferring wealth rather than its creation and the use of resources to obtain this transfer is a loss to society how important rent seeking is as a part of the total monopolistic waste hinges on the size of the total expenditures induced by a given level of excess profits

rent seeking with non identical sharing rules the primary object of this paper is to examine the role of differential sharing rules within a collective rent seeking setting on the possible non existence of nash equilibrium focusing on groups that distribute part of the rent equally among their members and the residual according to relative effort we show that in rent seeking societies applying the two polar sharing rules equilibrium never exists in the general case where groups apply different but not necessarily the polar sharing rules we study the relationship between group variability in distributing rents and the problem of non existence of equilibrium in the rent seeking game

a dynamic model of endogenous trade policy empirical evidence suggests that past levels of protection are significant determi nants of current levels of protection we investigate dynamic interactions among interest groups and resulting endogenous links between current and future trade policies we explore these intertemporal links in a small open economy in which lobbying and tariff policies are the outcome of a dynamic game among factor owners the model can generate cycles with prolonged periods of free trade and or prolonged periods of restricted trade i e persistent trade policies an interesting aspect of the environment is the role of lobbying as a partial

the welfare consequences of directly unproductive profit seeking dup lobbying activities price versus quantity distortions abstract this paper is a contribution to the growing literature on the theory of what bhagwati 1982 has christened the theory of dup activities these are activities that use up real resources in making profits i e income without producing directly or indirectly a good they result therefore in the contraction of the availability set defined on goods for one generic subset of such dup activities namely distortion triggered lobbying activities the paper establishes asymmetrical propositions on the possibility of such dup lobbying resulting in a paradoxical improvement of welfare

a problem of incentive compatibility in the north sea petroleum industry abstract the principal agent relationship between the governments of the uk and norway and the multinational oil companies active in the north sea petroleum industry is to some extent different from a typical principal agent interaction for almost three decades the major criterion for allowing a company to take part in the activity was its previous and planned contribution to the domestic economy by means of applying the highest possible domestic inputs this study applies mathematical modeling to show that the authorities had the opportunity to offer an incentive scheme to persuade the oil companies to involve domestic suppliers at the governments preferred level unlike a typical government regulatory framework which aims to increase efficiency in terms of price and or quality the incentive compatible scheme discussed in this paper could in certain circumstances generate inefficiency in the daily operation of the oil and gas fields

some implications of corporate taxation for rent seeking activity in this paper we show that corporate taxes are likely to have considerable implications for rent seeking activity we find that corporate taxation tends to significantly reduce rent seeking and that it favors rent seeking by established firms and discriminates against new and zero profit firms indeed we show that corporate tax regulations may completely block rent seeking by new corporations and that rent seeking competitions may be characterized by an equilibrium that features a small number of profitable and well established firms tax regulations may therefore impart an oligopolistic tendency to rent seeking markets moreover our results may have significant implications for the effects of corporate taxes on patent races tournaments and other first past the post competitions

risk aversion in rent seeking and rent augmenting games the effects of risk aversion are examined for two types of expenditures in rent seeking contests a rent seeking expenditures which improve the probability that the rent is obtained and b rent augmenting expenditures which increase the size of the rent to be awarded risk aversion is shown to reduce expenditures of type b unambiguously while having an indeterminate effect on those of type a these two contrasting results are shown to derive from the very different effects rent seeking and rent augmenting expenditures have on the riskiness of a player s position

price cost and exploration sensitivities of prospective activity levels in the ukcs an application of the monte carlo technique abstract building on previous work this paper develops a probabilistic economic model using the monte carlo technique to project activity levels in the uk continental shelf the modelling emphasises the importance of oil and gas prices the investor s hurdle rate of return changing prospectivity and the exploration effort activity in the medium term is found to be highly sensitive to oil and gas prices development costs and exploration effort field investment may fall very substantially and the oil production decline rate could be fast from 2000 to sustain higher activity levels further technological advances and their widespread adoption are essential

quality and productivity in the competitive strategies of brazilian industrial enterprises abstract after a long period of protected development brazilian industry is facing the new competition an analysis of manufacturing based competitive strategies in developed countries shows a trajectory of development of competitiveness starting from price and moving through quality time diversity and uniqueness the competences needed for each element are cumulative this poses challenges for firms in developing countries which are faced with a sudden exposure to new standards of competitiveness they may recognize the need for better quality or diversity but not have the basis for achieving them the problems facing firms in brazil as they wrestle with these problems in a liberalizing economy are discussed