the solution to the tullock rent seeking game when r 2 mixed strategy equilibria and mean dissipation rates in tullock s rent seeking model the probability a player wins the game depends on expenditures raised to the power r we show that a symmetric mixed strategy nash equilibrium exists when r 2 and that overdissipation of rents does not arise in any nash equilibrium we derive a tight lower bound on the level of rent dissipation that arises in a symmetric equilibrium when the strategy space is discrete and show that full rent dissipation occurs when the strategy space is continuous our results are shown to be consistent with recent experimental evidence on the dissipation of rents

strategic behavior in contests comment almost by definition contests involve strategy this is especially true in contests between unevenly matched contenders in a recent article avinash dixit 1987 explored strategic commitment in contests between a favorite and an underdog the favorite is defined as the player whose chance of victory exceeds one half at the nash equilibrium an underdog s chance is less than one half dixit concludes that if the favorite has the opportunity to move first then he will overcommit effort compared with the nash equilibrium an important implication of the favorite overcommitting effort is that strategic behavior leads to greater social costs see gordon tullock 1980 the opposite holds if the underdog has the opportunity to move first this paper demonstrates that the favorite will never overcommit effort given endogenous order of moves the favorite finds it advantageous to wait until the underdog moves surprisingly the underdog s best strategy is not to wait but to make the first move throwing the first punch the equilibrium order of play is for the underdog to move before the favorite in this equilibrium one never observes overcommitment of effort consequently extending dixit s model to allow for endogenous order of moves suggests that strategic behavior in contests will lead to undercommitment compared with nash behavior

a reconsideration of the twentieth century robert a mundell held his prize lecture december 8 1999 at aula magna stockholm university he was presented by lars e o svensson chairman of the prize committee this abstract was borrowed from another version of this item

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

lowest unique bid auctions with population uncertainty abstract we characterize the unique poisson nash equilibrium of the l owest u nique b id a uction luba when the number of bidders is uncertain and follows a poisson distribution

medical interventions among pregnant women in fee for service and managed care insurance a propensity score analysis this paper extends earlier research on the effect of managed care on the receipt of four medical interventions for pregnant women ultrasound induction stimulation of birth electronic fetal monitor and caesarean delivery propensity score methods are used to account for sample selection issues regarding insurance choice managed care enrollees are more likely to receive an ultrasound which may be indicative of receiving better prenatal care managed care plans reduce the rate of caesarean deliveries but such limitations may be beneficial given the substantial medical evidence that caesarean deliveries are over utilized the results indicate that insurance coverage does influence treatment intensity but that utilization controls and provider financial incentives do not adversely affect care for pregnant women

free entry and efficient rent seeking this paper concerns rent seeking and the extent to which rents are dissipated under various circumstances gordon tullock s 1967 insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple harberger 1954 deadweight loss indeed under tullock s original formulation and in the extensions of his work by krueger 1974 and posner 1975 rents are exactly dissipated at the social level 1 is spent to capture 1 so that the total welfare loss from such activities is equal to the harberger triangle plus the rectangle of monopoly profits

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

a note on poisson contests we apply the environmental equivalence property of poisson games myerson in int j game theory 27 375 392 1998b to show that in contests in which the number of contestants is a poisson random variable with at least two expected contestants and a non increasing return to effort ex ante aggregate effort is less than in a corresponding contest wherein the number of participants is equal to the expected number of contestants under uncertainty uncertainty about the number of participants in a rent seeking contest seems natural with rent seeking contests attracting socially wasteful investments of effort or scarce resources uncertainty generates a social benefit

style of practice and assortative mating a recursive probit analysis of cesarean section scheduling in italy we study practice variation in scheduling of caesarean section cs delivery across public and private hospitals in italy adopting a novel perspective we look at the role played by patients preferences for the treatment the recursive probit model is revisited as a useful tool to assess the presence of assortative mating of patients and provider driven by style of practice according to our evidence the propensity to schedule a cs is codetermined with patient self sorting into hospital types we measure a significantly higher inclination to practice cs scheduling in private hospitals and conclude that assortative mating is of minor relevance in our case even if we cannot exclude it to be present

international liquidity in a multipolar world today s global monetary and financial system to a remarkable extent continues to rely on the u s dollar for international liquidity this reflects the currency s historic role the liquidity of american financial markets and the absence of alternatives but with the emergence of emerging markets the capacity of the united states to provide safe assets will be outstripped by the growth of international transactions it is thus likely that other large economies presumably europe and china will eventually join the united states as sources of international liquidity and that other currencies will come to share the dollar s reserve currency status

golden fetters the gold standard and the great depression barry eichengreen oxford university press new york 1992 pp xix 448 39 95

hospital insurer bargaining an empirical investigation of appendectomy pricing employers increased sensitivity to health care costs has forced insurers to seek ways to lower costs through effective bargaining with providers what factors determine the prices negotiated between hospitals and insurers the hospital insurer interaction is captured in the context of a bargaining model in which the gains from bargaining are explicitly defined appendectomy was chosen because it is a well defined procedure with little clinical variation our results show that certain hospital institutional arrangements e g hospital affiliations hmo penetration and greater hospital concentration improve hospitals bargaining position furthermore hospitals bargaining effectiveness has diminished over time and varies across states

bargaining power fear of disagreement and wage settlements theory and evidence from u s industry the paper develops and estimates a theoretical model of wage determination and union nonunion wage differentials in order to overcome the institutional ctiticisms of the formal bargaining literature the paper generalizes the nash zeuthen harsanyi model by linking the solution to the institutional concepts of bargaining power and fear or cost of disagreement and by making the outcome depend not only on endogenous but also on exogenous factors an operational specification of bargaining power and fear of disagreement allows the model to be estimated with data covering twelve companies and trade unions during the period from mid 1950 s to the late 1970 s while giving limited support to the nashzeuthen harsanyi solution the empirical analysis indicates that the bargaining outcome usually deviates from the nash zeuthen harsanyi point and in accordance with the institutionalist claim that it varies significantly with exogenous factors contrary to the traditional labor economics view the results do not support the general conclusion that the bargaining solution lies on the marginal revenue product curve of labor instead the relevant coefficients suggest that for many firms and unions the outcome might be better characterized by the efficient contract vertical contract curve

a general analysis of rent seeking games in this paper we reconsider the basic model of efficient rent seeking we stress the importance of the shape of the players reaction curve in order to understand the impact of the technology of rent seeking on the structure of the outcome of the game we give a complete characterization of the pure strategy equilibria moreover the possibility of preemption by a stakelberg leader is discussed according to the nature of the technology of rent seeking available to the agents

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

contests with an unknown number of contestants this paper studies rent seeking contests where the contestants do not know the number of actively competing contestants two models are compared in the first all players are risk neutral in the second all have constant absolute risk aversion if the expected fraction of active contestants is low an increase in the number of potential contestants increases individual rent seeking efforts this effect is in contrast to the complete information case where individual rent seeking efforts decrease in the number of contestants the effect is more likely under risk neutrality but also possible under risk aversion equilibrium rent seeking efforts are lower under risk aversion if and only if the expected fraction of active contestants is low

contest efforts in light of behavioural considerations this study shows that distortion of probabilities is a possible reason for rent under dissipation incontests with relatively small number of participants such distortion may also result however inover dissipation of the contested rent focusing on contests with homogeneous contestants and thecommonly studied contest success function our main results clarify under what circumstances i rents are more under dissipated relative to the standard situation where probabilities are notdistorted ii rents are under dissipated yet less intensely relative to the standard situation whereprobabilities are not distorted iii rents are over dissipated and iv the contest does not possess asymmetric interior equilibrium in pure strategies

rational expectations and tax policy experimental market evidence abstract experimental markets are used to test whether 1 1 subjects forecasts of future and unknown policy conform to the rational expectations hypothesis and 2 2 subjects purchases of commodities are made in anticipation of such policy forecast results confirm previous studies that support adaptive expectations on the other hand subjects exhibited a type of as if rationality by learning to alter their commodity purchases intertemporally in anticipation of fiscal changes this ability was only slightly diminished when policy was stochastic or when the micro economies were in disequilibrium and in chaos

nash bargaining model of hmo premiums this paper estimates a model of commercial hmo premiums based on nash s axiomatic approach to bargaining between hmos and employers the bargaining models incorporate variables that measure the power of the parties to affect the division of potential gains from a contract it is found that an increase in the number of competing hmos increases the employer s bargaining power and leads to lower premiums especially for for profit hmos it is also found that employers bargaining power over non profit hmos is positively related to the ratio of the hmo s administrative expenses total expenses

complete rent dissipation when the number of rent seekers is uncertain the focal question in the theory of rent seeking is the extent of rent dissipation as the indicator of social loss in general rent seeking models assume that the number of contenders in a rent seeking contest is known with certainty but given the hidden nature of rent seeking participants in rent seeking more usually can be expected to face an uncertain number of rivals we show that in a tullock contest with a stochastic number of participants complete ex ante rent dissipation is consistent with a pure strategy nash equilibrium this contrasts with but complements previous results of under dissipation when the number of rent seekers is uncertain our complete dissipation result expands the range of circumstances consistent with association of an observed rent with social loss

efficient rents 2 free entry and efficient rent seeking in the competition for a monopoly right in which the number of bidders is fixed tullock and others have found the value of the resources spent in the aggregate to capture the transfer to be sometimes less than and sometimes greater than the value of the monopoly we think this approach to be incomplete since it leaves unanswered the question of what determines the number of individuals who will vie for the right to be the monopolist it is unsatisfactory to imagine for example that the franchisor sets the number of contestants one could then foresee that rent seeking would arise to influence the permissible number of bidders and this merely moves the rent seeking dissipation question one step back