varying the intensity of competition in a multiple prize rent seeking experiment we experimentally test a rent seeking model under five levels of competition at one extreme a subject s probability of winning a prize is equal to her share of the total expenditures at lower levels of competition a subject s probability of winning is affected more by her own expenditures than by the expenditures of others predicted expenditure levels are positively associated with higher levels of competition consistent with previous rent seeking experiments we find that subjects spend significantly more than the nash equilibrium prediction at all levels of competition however expenditure patterns generally follow the nash prediction expenditures decrease as the level of competition decreases our experimental design also includes a lottery choice experiment to control for subjects risk preference we find that subjects who are more risk averse spend significantly less in the contest and this effect is particularly strong for female subjects

do too many cooks always spoil the stew an experimental analysis of rent seeking and the role of a strategic buyer laboratory methods are used to evaluate the effects of institutional arrangements and rent defending activity on rent seeking auction outcomes in part nash equilibrium predictions are a useful behavioral guide as predicted more rents are dissipated in perfectly discriminating auctions where the high bidder wins than in lotteries where relative bids determine the chance of winning also as predicted the introduction of a rent defending buyer reduces social costs nevertheless the social costs of rent seeking consistently exceed predicted levels moreover individual bidding especially by buyers deviates markedly from nash predictions

selling favors in the lab experiments on campaign finance reform campaign advertising can provide benefits to constituencies when used to fund the distribution of useful information but voters can be harmed if candidates finance such advertising by trading policy favors to special interests in exchange for contributions we report data from novel laboratory campaign finance experiments that shed light on this tradeoff and that provide rigorous empirical evidence on formal campaign finance theory our key finding is that voters respond to advertising differently between special interest and publicly financed campaigns and that the nature of this difference is qualitatively consistent with formal models predictions

how to identify trust and reciprocity this paper uses a three games or triadic design to identify trusting and reciprocating behavior a large literature on single game trust and reciprocity experiments is based on the implicit assumption that subjects do not have altruistic or inequality averse other regarding preferences such experimental designs test compound hypotheses that include the hypothesis that other regarding preferences do not affect behavior in contrast experiments with the triadic design do discriminate between transfers resulting from trust or reciprocity and transfers resulting from other regarding preferences that are not conditional on the behavior of others decomposing trust from altruism and reciprocity from altruism or inequality aversion is critical to obtaining empirical information that can guide the process of constructing models that can increase the empirical validity of game theory

the social costs of monopoly and regulation posner reconsidered focuses on social costs of monopoly and trade regulation in the united states benefit of marginal changes on antitrust activities equality of cost in obtaining monopoly and expected profit of monopolist elasticity of inputs in obtaining monopoly ebsco

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

the value of commitment in contests and tournaments when observation is costly we study the value of commitment in contests and tournaments when there are costs for the follower to observe the leader s behavior in a contest the follower can pay to observe the leader s effort but cannot observe the effectiveness of that effort in a tournament the follower can pay to observe the effectiveness of the leader s effort but not the effort itself we show that this distinction matters significantly when observation is costly the value of commitment vanishes entirely in sequential and endogenous move contests regardless of the size of the observation cost by contrast in tournaments the value of commitment is preserved completely provided that the observation costs are sufficiently small

time series model forecasts and structural breaks evidence from spanish pre emu interest rates analysis of the future behaviour of economic variables can be biased if structural breaks are not considered when these structural breaks are present the in sample fit of a model gives us a poor guide to ex ante forecast performance this problem is true for both univariate and multivariate analysis and can be extremely important when co integration relationships are analysed the main goal of this article is to analyse the impact of structural breaks on forecast accuracy evaluation we focus on forecasting several interest rates from the spanish interbank money market in order to carry out the analysis we perform two forecasting exercises a without structural breaks and b when structural breaks are explicitly considered we use new sequential methods in order to estimate change points in an endogenous way this method allows us to detect structural breaks in all four rates in may 1993 however the effects of these breaks are not very strong since we found scarce gains in forecasting accuracy w

gordon tullock and experimental economics gordon tullock s research has substantially influenced the development of economic science in general and experimental economics in particular we present the first comprehensive survey of this significant achievement we show how tullock s research in bioeconomics influenced later developments in neuroeconomics and how his pioneering work on rent seeking generated a literature of laboratory tests of his hypothesis we also describe tullock s own experiments and draw attention to his early insights on trust games

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

risk attitudes and heterogeneity in simultaneous and sequential contests we prove existence and uniqueness of equilibrium in rent seeking contests in which players are heterogeneous in both risk preferences and production technology given identical linear production technology if the number of risk loving players is large enough the aggregate investment in equilibrium will exceed the rent and all risk neutral and risk averse players will exit the contest in simultaneous and sequential contests with two players we can identify the favorite and underdog based on both players preference parameters our theoretical results suggest that subjects in some recent contest experiments behaved as if they were risk loving

transfer seeking and avoidance on the full social costs of rent seeking we would like to thank gordon tullock and an anonymous referee of this journal for their helpful comments and suggestions this abstract was borrowed from another version of this item

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

the fertility effect of dependent tax exemptions estimates for the united states the effect of the dependent tax exemption on the fertility rate in the united states is estimated the estimation is an improvement on previous work in that a non linear specification is used to better capture the shape of the demand for children it is found that the marginal effect of the dependent exemption decreases with the level of the exemption this suggests that although subsidies for childbearing will increase fertility it becomes increasingly difficult for countries to increase fertility through this type of scheme

on forecasting interest rates an efficient markets perspective abstract efficient markets do not preclude economic agents from successfully forecasting movements in short term interest rates for brief forecast intervals however ex ante changes in long term rates are sufficiently close to zero that economic agents are not likely to improve upon the no change prediction of the martingale model economic agents in effect are not likely to succeed in forecasting short term movements in long term interest rates this paper illustrates the closeness of the martingale approximation for two sets of canadian interest rates data emphasizing the importance of the forecast interval the paper then examines three sets of recorded forecasts of canadian interest rates and finds results consistent with the theoretical discussion

an experiment on sequential rent seeking in an experiment on sequential rent seeking we find that the theoretically predicted first mover advantage does not exist empirically rather a second mover advantage can be observed though the subgame perfect equilibrium can not prevail in experiment individual behavior is highly reasonable nevertheless such that subjects appear to play a reduced form of the original game we also observe that the efficient fair outcome can not be achieved because of the exploitation opportunity for the second mover the observed behavior is quite different from that in ultimatum and trust game experiments 2000 elsevier science b v all rights reserved

non prisoner s dilemma abstract all prisoner s dilemma experiments pre select contestants prevents them from communicating and changing partners in the middle of things this brief experiment changes all three of these conditions and gets a very high degree of cooperation

state abortion rates the impact of policies providers politics demographics and economic environment abstract this paper uses data on abortion rates by state from 1974 1988 to estimate two stage least squares models with fixed state and year effects restrictions on medicaid funding for abortion are correlated with lower abortion rates in state and higher rates among nearby states a maximal estimate suggests that 19 25 of the abortions among low income women that are publicly funded do not take place after funding is eliminated parental notification laws for teen abortions do not significantly affect aggregate abortion rates a larger number of abortion providers in a state increases the abortion rate primarily through inducing cross state travel

risk lovers and the rent over investment puzzle in this paper we prove existence and uniqueness of equilibrium in a rent seeking contest given a class of heterogeneous risk loving players we explore the role third order risk attitude plays in equilibrium and find that imprudence is sufficient for risk lovers to increase rent seeking investment above the risk neutral outcome moreover we show that rent can be fully dissipated in a standard tullock contest played by a large number of risk lovers

reexamining efficient rent seeking in laboratory markets given millner and pratt s 1989 finding of behavior inconsistent with theory we reexamine efficient rent seeking in experimental markets we show that a when r 3 no nash equilibrium exists and therefore behavior has no theoretical benchmark to judge consistency and b when r 1 with a new experimental design utilizing an explicit expected payoff matrix rent seeking behavior is consistent with both nash equilibrium and dissipation hypotheses

experimental comparison of multi stage and one stage contests this article experimentally studies a two stage elimination contest and compares its performance with a one stage contest contrary to the theory the two stage contest generates higher revenue than the equivalent one stage contest there is significant over dissipation in both stages of the two stage contest and experience diminishes over dissipation in the first stage but not in the second stage our experiment provides evidence that winning is a component in a subject s utility a simple behavioral model that accounts for a non monetary utility of winning can explain significant over dissipation in both contests it can also explain why the two stage contest generates higher revenue than the equivalent one stage contest

house money effects on trust and reciprocity in a typical laboratory investment game experiment participants endowments are provided by the experimenter thus the worst case for the investor is that she loses all of her found money by contrast in naturally occurring environments investment decisions can often lead to a loss of one s own money this paper investigates whether trust found in one shot anonymous laboratory interaction is robust to own money environments our results show that consistent with previous investment game results most investors send a positive amount and most trustees return at least the transfer amount regardless of whether the investors purchase or are gifted their endowment however investments are on average lower when participants use their own money and the fraction of maximum investments the most risky investment decision is only half as large under own money as it is under gifted endowments our results explain why one should exercise caution in placing trust in any government s ability to spend other people s money prudently

on perfect rent dissipation if economists are united on anything it is the proposition that monopoly prices reduce economic welfare by preventing the realization of the maximum gains from trade in any market the extent of such distortions to efficiency are often called harberger costs after arnold harberger s 1954 provocative attempt to measure the extent of these losses in the u s economy more recent analysis has revealed that when monopoly power is achieved via regulation at least part of the monopoly rents so gained will not be simple transfers from consumers to producers but will be dissipated by producers rent seeking activity since such activity employs real resources there are additional costs to monopolization beyond the harberger costs as emphasized by gordon tullock 1967 and richard posner 1975 indeed posner and others have argued that if competition for the monopoly rents is perfect all of the expected rents from regulation will be converted to welfare losses while franklin fisher s 1985 comment has qualified this conclusion somewhat the upshot of the debate is that the rent seeking or tullock costs may greatly exceed the harberger costs 1 another recent strand of the analysis concerns the time pattern over which monopoly returns are dissipated by competition to gain and hold the monopoly right robert mccormick et al 1984 emphasize that to the extent such expenditures are sunk they are forever lost and not recoverable by deregulation while conceding the point martin cherkes et al 1986 argue that most rentseeking expenditures are recurring not sunk and therefore large gains from deregulation remain the purpose of this essay is to point out that recurring or sunk even the largest specification of the harberger and tullock costs of regulatory monopolization may fall far short of the actual welfare costs this is because the analysis concentrates on the rent seeking tullock costs and largely ignores the parallel rent defending2 tullock costs a proper assessment of such rent defending tullock costs might more than double the maximum welfare costs of regulation suggested by posner

characterizing equilibrium rent seeking behavior a reply to tullock rent seeking contests can have different rules for designating the successful rent seeker we have investigated the case where the rule is that the successful rent seeker is the contender who has made the greatest outlay in the rentseeking quest hillman and samet this issue it is well known that for such contests there exists no nash equilibrium in pure strategies i e contenders choosing outlays as strategies we show however that there does exist a unique equilibrium in mixed strategies the equilibrium has the characteristic that the expected value of outlays made by the rival contenders equals the value of the prize being contested without regard for the number of contenders hence for any number of contenders rent dissipation is expecta

are rents fully dissipated students of rent seeking have erred in focusing their attention exclusively on the analysis of competitions for exogenously specified transfers when redistributive policies are treated as endogenous choices it is clear that there are both incentives and opportunities for policymakers to design them in ways that prevent the wasteful dissipation of a large proportion of the intended transfers an analytical framework that treats policy design in this way is capable of explaining a variety of common attributes of redistributive policies that are apparent anomalies under the traditional approach to rent seeking furthermore we predict and find supporting evidence that authoritarian regimes tend to be associated with higher ratios of government revenue to total income than do democracies we attribute this tendency to the substantially greater potential for dissipative competition for revenues under democracy than under dictatorship finally available estimates of lobbying expenditures and rents transferred under the recent federal crude oil controls contradict the hypothesis that rents are fully or almost fully disspated through political competition

an economic analysis of the demand for abortions research in estimating the demand for abortions is conducted by using an economic model and examining socioeconomic factors some suggest that a households fertility control decision is decided by a comparison of the costs and benefits of an additional child over a period of time therefore abortion is a choice related to the interaction of preference cost and income a womans marital status is another factor in the abortion decision an unmarried women may having a greater demand for abortion since the demands on her are greater another factor is a womans employment status an employed woman more likely having a higher abortion religious affiliation may be another determinant in lower demand for abortion since most religions oppose abortion however in surveys of catholic women 74 believed that a woman less than 3 months pregnant should make her own choice on abortion educational status was also thought to effect abortion demand but results showed no significance if the laws were changed abortion were illegal and the price increased 50 the abortion rate would drop by 40 5 the prohibiting of government funding for abortions would cause a 17 5 decrease future trends in abortion are likely to increase however due to the declining marriage rates and increased divorce rate other factors that will effect these trends include sexual behavior patterns contraceptive availability and the perceived risks involved in birth control

market and survey forecasts of the three month treasury bill rate in this article four readily available one quarter ahead forecasts of the three month u s treasury bill rate are compared the forecasts considered are 1 a prediction from the futures market 2 a forecast derived from an implicit forward rate calculation 3 a survey gathered forecast and 4 a no change forecast each forecast is examined for general forecast accuracy and for the extent of bias contained in each forecast over the twelve year period 1977 88 results indicate that the futures rate statistically dominates the other three forecasts while the survey and forward rate projections generally are found to be the least accurate and most biased copyright 1992 by university of chicago press

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

forecasting canadian short term interest rates the author investigates the forecasting performance of a number of simple prediction techniques for short term interest rates in particular quarterly forecasts of canadian three month t bill rates from one to forty quarters in the future are generated during 1963 92 using several time series methods and market based yield curve strategies comparison is made with the martingale and for a shorter recent sample with the predictions made by several economic forecasters for the most part utilization of the yield curve proved best though it must be granted that no methodology was able to outperform the martingale for horizons up to a year

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

rent seeking rent defending and rent dissipation in the preceding analyses of rent defending the posner model yielded welfare losses in excess of the combined areas of the tullock rectangle and the harberger triangle in only one instance furthermore this particular circumstance necessitated voluntary participation in a game with a negative expected value 13 for the tullock rogerson model the explicit addition of rent defenders had no impact on aggregate dissipation

an experimental investigation of efficient rent seeking the debate about the measurement of the amount of rent dissipated in rent seeking activities is unable to be answered by observations from the naturally occurring environment current theoretical investigations have indicated that a number of factors will affect the amount of rent that can be assumed to be dissipated by rent seeking the theory of efficient rent seeking predicts that the number of rent seekers their risk posture their ability to enter and exit the rent seeking process and the manner in which the probability of receiving a rent is determined will affect the amount of rent that is dissipated

the social cost of rent seeking first estimates omists have been unanimous in their verdict that rent seeking is socially wasteful if rational from the practitioner s perspective 1 the entire literature on rent seeking that has developed over the past twenty years has focused on a describing the process of rent seeking b describing the theoretical consequences of rent seeking and c applying the theory to examination of political behavior and political outcomes to our knowledge there have been no attempts to empirically verify quantify the alleged social waste due to rentseeking the purpose of this paper is to report our first stab efforts in this regard we make no pretense of advancing the theory of rent seeking the investigation is an empirical search for a phillips curve type of relationship between incidence of rent seeking in the u s economy and the size growth of that economy our findings based on both time series and cross sectional analysis of the u s economy verify the existence of a social cost to rentseeking our crude estimate of the impact of rent seeking suggests that rentseeking as we measure it cost the economy an additional 22 6 percent of measured gnp in 1985

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

inter team contests with power differential abstract we investigate the impact of asymmetry on behavior in inter team contests in asymmetric environments one team has a greater probability of winning given the same contribution level unfair contests or has a lower cost of contributing uneven contests we explore how such asymmetries impact behavior asking how being advantaged or disadvantaged influences contributions we find both advantaged and disadvantaged teams contribute much more than theory predicts but in such a way that ex post winning probabilities of the contests are consistent with theoretical predictions at the individual level contributions are predicted by beliefs about own team and opponent team contributions the determinants of contribution by members of the disadvantaged team differ depending on the nature of asymmetry contributions by the disadvantaged team members are responsive to beliefs about contribution by opponents in unfair contests while in uneven contests they are responsive to beliefs about the contribution by teammates

risk aversion and rent seeking an extension and some experimental evidence theoretical investigations indicate that the risk attitudes of individuals will effect the amount of rent that can be assumed to be dissipated by rent seeking activities following this line of investigation we extend hillman and katz s work to a small numbers case and demonstrate that the degree to which a monopoly rent is dissipated is dependent upon the structure of the risk attitudes of two risk averse individuals

estimating the factors determining the demand for induced abortions among married women in taiwan this paper purports to estimate the characteristics of women who had experiences of abortion in 1991 based on an economic model of fertility the study makes use of a national survey on the knowledge of attitude towards and practice of family planning and reproductive health among married women in taiwan the results show that older women with higher family income and who live in urban areas were more likely to have the pregnancy terminated in addition the decision to have an abortion was negatively correlated with prior pregnancy loss but positively associated with the number of previous live births on the other hand the availability of abortion services as measured by the number of legal abortion providers at city and county levels had a negative effect on the demand for abortions the local female unemployment rate was found to be positively correlated with the woman s decision to have an abortion

the treasury yield curve as a cointegrated system this paper examines the temporal relationship between interest rates on treasury securities ranging in maturity from three months to 30 years we find strong empirical support that the seven treasury rates selected are cointegrated a conclusion that is insensitive to the normalization chosen in particular the hypothesis of noncointegration is rejeeted decisively regardless of the rate selected as the dependent variable in the cointegrating equation to determine whether this information can be used to improve forecasts of treasury rates the seven rates are forecasted with a corresponding erroreorrection model that is shown to outperform an augmented var model that ignores the cointegration of the rates the results are consistent with the belief that arbitrage limits the extent to which rates on different maturities of a given security diverge in addition the results confirm the appropriateness of imposing a common stochastic process for interest rates in equilibrium models of the term structure

the impact of state abortion restrictions on minors demand for abortions this study uses a weighted least squares model and a fixed effects model to estimate the impact of parental consent laws and laws governing medicaid funding of abortions on the adolescents demand for abortion in the united states during 1978 90 the focus is on adolescent pregnancy because 12 of total legal abortions in 1987 were to adolescents aged under 18 years the rate of abortion and types of abortion law range widely between states data are obtained from the us center for disease control on reported abortions from the naral foundation on the dates of actual enforcement restrictions and from the alan guttmacher institute on abortion providers the empirical model is based on a model developed by grossman and joyce proxy measures are used to represent abortion sentiment fixed effects models indicated that there was a decline of 13 17 in adolescents demand for abortion in states with enforced parental involvement laws compared to states without enforced laws the results implied a 9 15 decline in adolescents demand for abortion in states that restricted medicaid funding of abortion compared to states that did not there was a positive association between abortion demand and income and between abortion demand and the availability of abortion providers the inclusion of the abortion sentiment proxies did not change the signs and magnitudes of the impact very much in the fixed effects models it is posited that the negative impacts of abortion restrictions on adolescent abortion demand cannot be attributed to unobserved heterogeneity four methods of modeling are used to account for the potential role of unobserved heterogeneity